Economy, Energy and Tourism Committee

Meeting date: Wednesday, March 6, 2013

Official Report 560KB pdf

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“Low Carbon Scotland: Meeting our Emissions Reduction Targets 2013-2027”

Item 2 is an evidence-taking session on the Scottish Government’s report on proposals and policies 2. This morning, we are joined by Fergus Ewing, the Minister for Energy, Enterprise and Tourism. He is accompanied by David Wilson, director of energy at the Scottish Government; Gavin Peart, head of strategy unit, building standards at the Scottish Government; and David Fotheringham, team leader, sustainable housing strategy, sustainability and innovative funding division at the Scottish Government.

I invite the minister to make some introductory remarks.

My remarks will be shorter than those of last week, which were on a similar topic.

Thank you for inviting me here today to talk about the second draft report on proposals and policies for meeting Scotland’s climate change targets. The Scottish National Party was elected in 2007 with the manifesto commitment to legislate for a target to cut Scotland’s emissions by 80 per cent by 2050 and to set annual targets to fix the pathway towards that goal. In 2010, Scottish emissions were 24.3 per cent lower than they were in 1990. That is more than halfway towards the 2020 target of 42 per cent. By way of comparison, Scotland has reduced its emissions faster than any member of the European Union 15, and by more than the average of the expanded European Union 27.

It is fair to say that the issue of climate change has slipped down the global agenda in recent years, with international negotiations stalling in the face of concerns about economic downturn. That has ramifications for Scotland because we are part of the global system and decisions that are taken by the United Kingdom, the EU and more widely have implications for our emissions.

We remain committed to meeting our climate change targets. The draft RPP2 shows how it can be done, building on RPP1, with new or enhanced measures such as our new 2030 target to decarbonise electricity generation, reducing its emissions intensity by more than four fifths from 2010 levels, and the evolution of our action to tackle the energy efficiency of Scotland’s housing stock, with the launch of our national retrofit programme. Achieving those ambitious targets will be challenging, of course, as the committee’s recent report on renewables showed. I thank members of the committee for that report and for the constructive debate that we had a couple of weeks ago.

As the committee has rightly noted, policies to decarbonise the power sector are the key to breaking the link between household bills and volatile fossil fuel prices. It is projected that, because of the net effect of energy and climate change policies, household bills in the future will be lower than they would be under a system that was dominated by gas and coal-fired electricity generation.

The draft RPP2 sets out options and recognises the uncertainties that are inherent in looking more than a decade into the future. It shows that there is some flexibility in deciding which proposals should be adopted and which options could be held in reserve. We need that flexibility between 2010-11 and 2014-15. The Scottish Government’s resource budget has been cut by 7.7 per cent in real terms, and the capital budget has been cut by a sizeable 26 per cent. The challenge of finding ways of funding action on climate change is considerable.

I welcome the committee’s scrutiny of the draft RPP2 and look forward to members’ questions.

Thank you, minister.

We are fairly tight on time and we have a lot of ground to cover, so I ask members to keep their questions short and focused. If the minister and his officials try to respond in equally concise fashion, that will be helpful in covering the ground that we need to cover.

One thing that has come through in the evidence that we have heard so far is that some witnesses have had difficulty in reading across from RPP1 to RPP2 because of the change in format and presentation. Why did the Government decide to present RPP2 in the format that it is in? Do you recognise that there is difficulty in trying to compare what is in RPP2 with what is in RPP1?

Government policies are inherently complex by their nature. In response to the accusation that it is difficult to read across between RPP1 and RPP2, we point out that RPP2 will replace RPP1, and our intention is to present a coherent set of proposals and policies without constant reference to the previous report. In other words, RPP2 stands on its own.

In many cases, comparing the projected abatement potential between the two documents is unhelpful because of the revisions to the underlying methodology that is used to calculate the figures. However, it is important to stress that the RPP2 document is a draft and that the purpose of the debate is that we benefit from parliamentary scrutiny and consider constructive, concrete and clear suggestions for improvements. If members have any specific suggestions, I am sure that my colleagues and I would be keen to listen to them.

Okay. In a similar vein, another issue that has been raised with us is whether there is enough transparency in the draft report on who is responsible for the costs—the Government, business or consumers. Is the document clear enough on that point?

As I said, if there are ways in which we can make the document clearer, we would be very happy to consider them. My colleague Mr Peart can consider the practical implications of a national retrofit programme, which are being considered primarily by Mr Mackay. Each of the particular proposals should be looked at closely, and they are being looked at closely, because there has to be a balanced approach. Perhaps Mr Peart could add useful comments on that.

As a matter of principle, we have to take a balanced approach in increasing the standards in relation to emissions and recognising the practical implications that that will have for the construction sector. In other words, we should not impose too rigorous regulations that might be worthy in themselves, but which might result in there being no building, insufficient building, or less building. We aspire to high standards on emissions, but we must recognise the realities of the impact on the economy, given that our budget is declining and the construction sector has, sadly, been contracting. We must recognise the realities of industry and its needs. That is why there is currently a consultation on those matters. Mr Peart might be able to add something on that.

That is one example of an area in which it is not easy to have absolute clarity as to ways and means and policy and consequence. A balanced approach has to be taken, which is what we are doing in close consultation with industry, which plays a key role in formulating our policies. Mr Peart might want to say a bit more.

The consultation is about the new-build standards, as far as building regulations are concerned, for energy. In 2007, the Sullivan panel, which was commissioned by the Scottish Government, made recommendations to the Government on the staged improvement of the energy standards in building regulations. It asked that the Scottish Government do a lot of research work and made recommendations on carbon reduction: a 30 per cent domestic emissions reduction for 2010 followed by a 60 per cent domestic emissions reduction for 2013, compared with the 2007 energy standards.

We did a lot of research as far as the standards were concerned, such as on the impact on and cost to industry. Our research indicated that the 60 per cent reduction would add around £10,000 to the cost of an average house. As a result, Mr Mackay has decided to go to consultation on a more measured improvement. There will still be an improvement in terms of abatement; it will be a 45 per cent improvement on the 2007 standards.

Thank you. I remind members that we need to be careful not to stray into the territory of other committees when we are scrutinising the RPP2. We have a fairly strict remit for what we are looking at.

Minister, in your opening statement you mentioned decarbonisation. The Scottish Government has set a target for decarbonisation. How helpful would it be if the UK Government set a similar target? What dialogue have you had with the UK Government on that?

I sought to cover some of that last week. We are consulting on setting a 2030 decarbonisation target for the electricity generation sector. That follows the recommendations of the UK Committee on Climate Change. Mr Robertson is correct—we propose to set out the target in the RPP2. The Department of Energy and Climate Change is considering these matters in relation to the Energy Bill and the electricity market reform process. I do not in any way wish to misrepresent the UK Government’s position, but my understanding is that it has no plans to set a decarbonisation target and that it envisages that it will not do so until 2016. I also understand that there are amendments to the Energy Bill that will seek to encourage the Government to set targets in 2014, not 2016.

Why is that important? The reasons are fairly clear. If we want to have an offshore wind industry in the UK that makes a massive contribution to the economy and creates tens of thousands of jobs, we need to give comfort to investors that there will be a market there to serve beyond 2020. The decarbonisation target is a key signal that we believe that that market should exist. Companies manufacturing offshore turbines, or any part thereof—and indeed the whole supply chain, which is massive—need comfort that there will be contracts to build after 2020. In order to persuade companies to set up in this area, we need to assure them that there will be a market after 2020; otherwise why would they come to Scotland to operate for a period of five years? For that reason alone, we think that the approach of the Prime Minister and the UK Government should be, “Courage, mon ami, courage”.

We understand that the Prime Minister is an ardent supporter of offshore wind, and we hope that he will put that expression of support into practical application to deliver the kind of message that I know the potential financial investors in this area want to hear.

09:45

I commend the Cambridge Econometrics report to the committee. I think that it was commissioned by WWF and Greenpeace; yesterday, I discussed it with WWF in some detail. Incidentally, it is an independent report. Its conclusions are that if we see in the UK an approach along the lines that I have suggested—which we advocate, as we have made clear to Ed Davey and his colleagues—the potential gain for the UK would amount to up to 1 per cent of UK gross domestic product. What an enormous prize! Therefore, there is a lot at stake here and a lot to be gained.

I discuss such matters with the energy developers and financiers all the time. There is absolute clarity and near unanimity that such an approach is the approach that is needed. I am not suggesting that that, in itself, would deliver the good results and outcomes that I have identified. There are many other challenges that need to be overcome. I do not want to overstate things, because those challenges are serious and various, but if a clear signal can be given to investors, I think that we will go some way towards removing the risk that there will be leakage of all the benefits and gains, including jobs, to Germany and France. Frankly, there is a risk of that happening at the moment.

Some of the witnesses from whom we have heard believe that RPP2 will have any chance of meeting the targets only if all the policies and proposals in it are implemented. Do you believe that? What additional measures can you bring into play that will help to meet those targets?

As I said in my opening statement, we are more than halfway towards achieving our target of reducing emissions by 42 per cent by 2020. Our performance has been good; in fact, I think that our performance in relation to other states in the EU 15 has been very good. I am afraid that I have not had the opportunity to study all the evidence to which Rhoda Grant alludes, so it would be logically absurd for me to draw conclusions about what witnesses said, as I do not quite know what they said.

It seems to me that significant progress has been made. The targets are ambitious. It is clear that a variety of measures and policies on a range of areas including renewable energy, reduction of emissions, transport and housing need to be pursued in a balanced fashion, but I am confident—given that we have made good progress thus far, that we have made a commitment to proceed further and that we have support across parties and across society—that there is every chance that we should be able to achieve the targets.

I direct you to the table on page 163 of RPP2, in which “Additional Technical Potential in Fabric and Energy Efficiency” is a heading. We heard evidence that that accounts for a huge amount of the emissions abatement potential. The Scottish Parliament information centre has produced a chart that shows that that additional technical potential—whatever it is—will make a huge difference. Can you tell us what that additional technical potential is? None of the witnesses could do that.

To be quite candid, I cannot, but I know a man who can and his name is David Fotheringham. From the look of the table on page 163 of RPP2, the matter appears to be fairly complex. As I have not addressed the table, it might be sensible and helpful to the committee if Mr Fotheringham could answer that question.

Please do.

The technical potential for fabric improvement that RPP2 sets out is based on our modelling for the Scottish housing stock. Our annual Scottish house conditions survey on the state of Scotland’s housing stock gives us very good information about the current level of energy efficiency.

We use DEMScot—the domestic energy model for Scotland—to assess the impact of installations and different energy-efficiency measures on the housing stock. That modelling shows that we have additional technical potential beyond the proposals and policies in RPP2. We have sound information about what needs to be done and the fact that such potential exists. At this stage, we are looking quite far ahead with regard to realising that potential, so it does not make sense for us to set out in detail how we will do so.

We will do further analysis on that and come up with a more definite proposal in the next RPP, which is due to be published towards the end of 2016. We are convinced that the abatement potential exists, but we need to do further work to identify how we can realise it. That could be done through tougher regulation or additional incentive schemes, or through some other policy that is developed in the next few years before the potential needs to be realised.

So you do not know what technologies will be used to realise it. You compare that additional technical potential with some of the other proposals and policies, but the impact is huge: it starts in 2018 and overshadows all the other proposals and policies in that area. Are you telling me that you do not know what that potential involves? Is it simply a wing and a prayer, as has been suggested?

No—we know what the measures are.

What are they?

There is a long list of measures, which includes things such as solid wall insulation, draught proofing, advanced heating controls and boiler upgrades—

But we are already doing those things, whereas this will kick in only in 2018.

You are right—we are already doing that work, and the national retrofit programme will take it further. However, we recognise that, even with the level of investment that we are projecting from the retrofit programme and the energy company obligation, some of those measures will still need to be undertaken during that period.

We also recognise that, looking that far ahead, once we have experienced the impact of the national retrofit programme and other schemes, some of the more difficult properties may still require more expensive treatments. We do not quite have the answers on how we do that—we have an idea of the type of measures that are needed, but we have to do further work to identify the exact mechanisms that we need to deliver them.

But the same chart shows that the national retrofit programme will have less of an impact. You say that the national retrofit programme includes insulation and heat, but you include in the same chart that additional technical potential, which you say includes the national retrofit programme. Surely that is double counting.

No—just to clarify, I am saying that the additional technical potential is over and above what we expect to achieve from the national retrofit programme and the other proposals and policies that we have set out. Our analysis suggests that, even with the implementation of those things, there is still further technical potential in the housing stock, and additional measures will still need to be taken. We need to do further work to identify how to unlock that potential.

I really do not follow what you are trying to say. You have mentioned things such as solid wall insulation, which I imagine is in the national retrofit programme. I do not understand what additional technical potential there is, or indeed where the funding for that comes in. If you are saying that the funding is for the national retrofit programme, who will pay for the additional measures? If it is the same thing, why are those areas not on the same line in the table?

In RPP2 we have made assumptions about the level of investment that would be available through programmes such as the national retrofit programme and through the energy company obligation. That will take us part of the distance towards getting the measures installed, but further measures will still be needed beyond that. A certain proportion of the stock can be covered by the existing proposals and policies, but further measures will still need to be implemented.

What are the further measures?

They are measures such as solid wall insulation, advanced heating controls and boiler upgrades.

Surely they are included in the retrofit programme.

They are. I am saying that the investment that we project from current programmes will do an awful lot of the upgrades that we need, but it will not do all that we need—some will be left over. We are talking about the same kind of measures, but we are saying that we will not be able to do them all under the programmes, so we will have additional potential left over.

Are you saying that the figures are on different lines because different funding streams will be involved?

Perhaps I can clarify this. I strongly agree with David Fotheringham’s explanation. We have been open and—I hope—clear about the fact that we are dealing with something that is slightly different. For the next five or six years, we are clear that we are implementing the national retrofit programme and we have a set of policies at Scottish, UK and European levels under which we know what will be done. We can evaluate those policies’ impact and measure their likely emissions reductions.

However, RPP2 is increasingly getting into how we will reduce emissions on a 10 to 15-year timetable. We do not have clear budgets for that period or a clear roll-out of policies well into the 2020s on the precise detail of how we will implement renewable heat or the transport, housing and other measures. The level of detail about what will happen in 2025 obviously differs from that about what we know we will do in 2013.

The key point about what we call the technical abatement potential is that the analysis and modelling that we have done and all the advice that we have got from the Committee on Climate Change and other sources say that the scale of savings that could come from the housing, transport and land use measures that we have put in the report is achievable. However, we do not yet have the level of detail on the precise policy instruments and budgets that will be required to deliver the savings.

As we are talking about a period that is six years away at its earliest—and for much of the new part of the RPP, the detailed numbers are for 2023 to 2027—it is not unreasonable for the detail to be less precise further out than it is rightly expected to be for 2013 to 2015-16, which is the spending review period.

I agree that there is a difference, but that is not unreasonable. The key point is that the figures are achievable. Over time, we are building up the policies and proposals to deliver them, and we are adamant that we can do that.

The additional technical potential kicks in from 2018, which is the same time as the national retrofit programme appears to start providing carbon abatement. In the same year, the figures are 22 for the national retrofit programme and 72 for additional technical potential. The national retrofit programme is happening now, yet you do not know what the additional technical potential is. We could pick a number and double or treble it—whatever. You do not know the figure.

As David Fotheringham said, we know the technologies and the scope of the investment. The issue is the type of investments across the mix of housing—

Are you saying that you do not know who will pay for that?

We have openly and clearly said in the document that we do not have a clear policy framework, a clear set of budgets and clear delivery mechanisms for implementing the technical abatement potential. Because we are talking about 2018 and beyond, part of the challenge is working through precisely how we will do the work from 2018 onwards.

We clearly need to start that task now, and that is exactly what we are saying. We do not think that it is unreasonable to draw the distinction between what we are very actively doing with things such as the national retrofit programme, and what we need to do to build up our policy basis, the framework for the budgets, the policy levers and everything else to make sure that we can deliver on the technical abatement potential on a longer timescale.

10:00

I am not getting anywhere, so I think that I will probably leave it.

Good morning, minister, Mr Peart, Mr Wilson and Mr Fotheringham.

Mr Wilson, I know that you do not have budgets, but you have put forward figures that are based on your technical proposals. With the same rationale that Rhoda Grant just used, can I ask whether there will be lower emissions potential in transport, starting in 2025?

I remind Chic Brodie that transport emissions do not come within the committee’s remit.

Am I allowed to pursue the question?

I am happy to let the witnesses answer it, but I would prefer your next question to be on an issue that is within the committee’s remit.

Thank you, convener. On the basis that I have asked the question, I will pursue it.

Why will it take so long to realise that potential and what ambition is there to realise it before 2025?

Again, I will not go into detail on transport, but the transport chapter shows that significant savings are being made from all the activities that are already under way. As on the housing side, given the scope for technological changes and innovations in the car market—whether that means electric vehicles or anything else—we are clear that there is a set of technically possible further savings, over and above our central case model, which we think that we will be able to deliver by 2025. I remind members—I make the point again—that that is 12 years away. Remarkable things can happen, as we have seen with telecommunications and everything else. There is significant scope for further changes and it is not unreasonable to have a sense of what those might be in the document.

The transport section—I am asking about transport again—is very comprehensive and includes energy aspects. Is there a what-if scenario in which you could bring forward proposals for potential abatement?

I emphasise again that where there are things that we could do sooner than 2025, we are already doing them. Over the next few years, we need to develop the realisation of the technical potential abatement benefits. I do not want to commit to bringing them further forward, but there is a range of measures, including the various housing initiatives and the European Environmental Citizens Organisation for Standardisation study on electric vehicles. A lot of policy development is under way to evaluate how we can deliver that technical abatement potential. Who knows? That process might enable us to realise the benefits sooner, which we obviously want to happen, but we need to work out what is possible, in relative terms, with developers, the industry, consumer groups and everyone else.

Some progress has been made in other areas in relation to transport. Although Keith Brown has primary responsibility for transport, I have some involvement in dealing with the companies involved. It is relevant to mention the success of Argent Energy, a company that is headed up by Jim Walker, formerly of NFU Scotland. The company is at the forefront of innovative work in adapting public transport in Scotland to the use of biofuel, with great success. That extremely successful Scottish company is pioneering in that field.

We also have Professor Martin Tagney, who is renowned as a leading—possibly world-leading—expert in this area.

I mention those examples—they are not in my briefing notes—to avoid painting a canvas that nothing is happening, because an awful lot is happening in an awful lot of areas. I know that Chic Brodie was not suggesting that it is not.

If there was a what-if scenario, policy formulation in relation to what is needed to accelerate some of the programmes would be helpful. However, I take the point about what Jim Walker is doing. The basis of my question is how we optimise the opportunities to further reduce emissions in relation to the energy aspects of transport.

That is a sensible question. The direct answer is to reach out to and work with business, and to build on what is being achieved because more can be done. In other words, we should not consider the debate as one for the public sector. We need to engage business, look at the successes and encourage business to do more—after all, business is delivering success in the biofuel field. I hope that that is a recommendation about the modus operandi that we can deliver. Perhaps the committee will want to mull it over.

I have two questions, the first of which is for the minister. Are the UK Government’s prevarication on energy market reform, its failure to invest sufficiently and early enough in our grid, the delays with cables to Orkney, Shetland and the Western Isles, the general grid constraints and, indeed, the island transmission charging issues inhibiting our ability to meet or exceed our climate change targets?

I entirely agree with Mr MacKenzie’s thesis. I touched on some of this last week. We have reached a critical stage in relation to the development of our renewable energy potential. Mr MacKenzie has correctly identified the barriers, such as EMR and islands transmission charging, in relation to which the extra cost can vary from £10 per megawatt hour to anything up to £200. I have a question for the UK Government: how can it be fair, in a putative unitary state, for one part to pay up to 20 times more than another part? What is the answer to that question? The only answer is that it is not fair. There must be a solution. Therefore, we are taking a constructive approach to working with Ed Davey and others. I was delighted that he agreed to my suggestion to participate in and jointly lead a cross-governmental working group on island transmission charging. Incidentally, I do not think that there are any other cross-governmental groups, so Ed Davey’s agreement to the formation of the group is a recognition of the UK Government’s willingness to work together to form a solution. However, the group must come to a quick solution.

Ed Davey is in Scotland for the renewables conference on 18 March. I very much hope that the discussions that may take place that day will advance the matter. If we do not get a solution, how can we expect investors to invest in the islands of Scotland? We cannot. If we do not get rules under EMR, how can we expect investors to invest in the UK?

I appreciate that the UK Government will say that the draft consultation on strike prices and contracts for difference is nearly upon us—it will happen in May. However, that is too late for the companies, such as Wavegen, that have pulled out. The longer the delay and prevarication, the longer the investment hiatus—to be frank, the view of financiers in the industry is that that is the position at the moment—and the more we risk investment leaking from the islands, Scotland and the UK to Germany and France. That is a serious position indeed—it is one of the most serious affecting my portfolio. I hope that you can detect from my demeanour and tone that it is one that I treat with the utmost seriousness and gravity.

The matter is reserved, so it is entirely the responsibility of the UK Government to come up with a solution that does not see our islands becoming scorched-earth areas where no renewables development takes place. That is the risk that faces us. It is good that I have had the opportunity to respond in Parliament to a member’s question and set out clearly that risk for one and all.

Hear, hear.

Thank you, minister.

My second question is on a slightly different area of the inquiry. I am glad that you are here, Mr Peart, because I know that you understand the technicalities of the issue that I hope to get into. The committee has taken evidence from people such as Richard Atkins and Professor Sean Smith, who are concerned not only that little work seems to have been done on post-occupation evaluation of houses but that the little work that has been done has indicated that the theoretical energy efficiency performance of houses and the actual performance do not always match up, and that there seems to be quite a significant gap. What do you feel about that? Do you agree that more work requires to be done in that area?

Yes, undoubtedly so. We expect the occupiers of a building to use it in a certain way, but often they do not use it in that way. I presume that the other issue is whether what is designed is built on site. Those matters are of concern to us. However, we have made some inroads already.

Keeping to the energy side of things, we have produced some improved accredited construction details for thermal bridging and junctions between elements in houses. Those are available on our website and were introduced in 2010. In addition, we now have random airtightness testing to check the air leakage of houses. We are working with local authority verifiers, who do the building standards and verification work on the ground, to improve their performance and get consistency across Scotland. We are also very much tuned into the zero-carbon hub work down south, which is looking at the same issues.

Thank you. The issues that you have touched on seem to be very marginal, whereas some of the failures that have been reported to the committee are of a greater order. Do you agree that the problem is really the standard assessment procedure calculation, which is not fit for purpose?

I have read the 2007 Sullivan report, to which you have referred. That report indicated that the payback time for some of the technologies—for example, heat pumps—was of the order of 60 years. Although that timescale will have changed somewhat because of rising energy prices, are you concerned that it points to a massive failure in the thinking behind the green deal? Given such payback times, nobody is going to take a loan for technology such as heat pumps. That points to a fundamental flaw in the green deal; and if it does not do its job, that inhibits our overall ability to take advantage of the green deal and reduce our carbon emissions.

I am afraid that I am not able to comment on the green deal, which is not my policy area.

I will slightly rephrase the question, then. Would any reasonable person take out a loan that is expected to be paid back over, say, a 10-year period, for anything that has a payback time of the order of 60 years, such as a heat pump?

10:15

As I said, loans are not the side of things that I deal with.

Yes, but you are familiar with heat pumps.

Yes, I am. I know that the installation of heat pumps is complex. When a boiler is installed, people can probably get away with a few things and it is a bit more forgiving in the way that it performs. However, things need to be spot on for a heat pump to deliver.

The green deal does not exist in isolation. It can be used in conjunction with other sources of funding, such as the energy company obligation, which is the new obligation that is being placed on energy companies, taking over from the carbon emissions reduction target scheme and the community energy saving programme. The ECO can provide additional subsidies to go alongside the green deal. The green deal can be subsidised from other sources of funding, such as Scottish Government funding, the home owner’s funds or funds from a landlord. The green deal will be helpful in certain situations, but it is not the only potential source of funding for people for particular measures.

Mr MacKenzie has identified what seems on the face of it to be a point that requires further investigation. I undertake that we will go away and investigate that.

The green deal is a UK finance mechanism. We have been working with the UK Government and we are broadly supportive of it, but we have a number of questions about its practicality and operability. For example, will people be willing to participate in the green deal given that they are used to calling for a plumber when things go wrong? We are asking people to take an entirely different approach towards the use of energy in their home. My premise is that people will want to use the local companies and tradespeople in whom they have confidence and whose services they have used for decades. The success of the green deal will therefore be predicated on the ability of ordinary small businesses such as plumbers and electricians to access that work. They must not be shut out of the work. Provided that they are properly accredited, they should have access to do the work at the agreed rate. That should be a requirement of the green deal.

I have made that point to the Westminster Government and I am waiting for a response. It is essential, because householders need to be able to use somebody in whom they have confidence, rather than a big firm that operates a couple of hundred miles away. We all know from our constituents about cases in which work goes wrong and the householder is left with the detritus of poorly fitted equipment and often other damage to their house through defective work. I am not suggesting that, because a firm is big, it will necessarily be poorer quality; my point is that people have confidence in the local firms that they have always used.

Further, if those local firms are part of the scheme, they will become recruiting sergeants for the scheme, because if they deliver it for Jeannie, Jim and Tony, word will spread, whether in Oban, in Mr MacKenzie’s patch, or elsewhere. People will then say that a local firm is doing the green deal and it is very good. That is how I think we will make the green deal catch on. Sadly, the solar feed-in tariff experience has been a disaster, with the UK Government being hauled through the courts and found to be in error. That has done a lot of damage to the confidence of firms, which in some cases have spent tens of thousands of pounds on accreditation.

Those are practical matters but, at the end of the day, practical matters often determine the success or failure of new initiatives, especially ones that require a different mindset on the part of the consumer before they are willing to participate.

The figures in RPP2 are heavily dependent on the installation of large amounts of CCS from 2020 to 2027. Will that be achieved and, if so, how?

As I mentioned last week, we in the Scottish Government have made clear our support for moving CCS from a policy to a reality. CCS and clean-coal technologies have the potential to transform our power generation and to make a massive contribution to Scotland’s low-carbon future but, unfortunately, despite the extremely strong case for CCS deployment, given our world-leading expertise, our research and development capacity, our strong industry capability, the fact that we have some of the best carbon storage sites in Europe, and the fact that the potential exists, these matters are reserved and we await the Westminster Government’s decisions on four remaining schemes to access the £1 billion of up-front capital support. Moreover, with regard to EMR, we are also waiting to work out the on-going revenue stream and support under the contracts for difference.

Until we know those things, we will be in the same kind of investment hiatus that we are in with new gas power stations, offshore wind and all other types of energy technology. It is unreasonable to expect investors to invest money until they know what the rules are.

The homes of many of my constituents, who are often private tenants in communal buildings, fall into the solid wall category. This question might be more for an official, but what initiatives over the RPP2 period will help to address energy demand among a group that is often the hardest to reach with the energy efficiency schemes that have been discussed?

With your permission, convener, I will ask David Fotheringham to answer this question on solid wall properties.

What might help is the national retrofit programme, which the Government is setting up to build on previous area-based programmes such as the universal home insulation scheme. Those schemes focused on low-cost insulation measures such as installation of loft and cavity wall insulation, but the national retrofit programme will focus on harder-to-treat buildings such as properties that require solid wall insulation.

My concern is also about the tenure of this housing stock which, as I have said, is privately rented. Indeed, I believe that 43 per cent of people in my constituency rent their houses and, in certain parts in the heart of it, the figure rises to about 75 per cent. For that reason, that segment of the population has always been identified as hard to reach, and I would be grateful for any information that you can give me about initiatives that will be targeted at them.

The national retrofit programme will also be targeted at privately owned properties. It will help social landlords by, for example, putting in work for right-to-buy owners, whose presence is often a problem in mixed dwellings. The idea is to combine funding from different sources to make a whole-area approach work, and the programme could help in that respect.

A number of funding sources, such as the landlord energy saving allowance, are already open to and benefiting private landlords but, as I have said, I think that the national retrofit programme will help. Although it is targeted at fuel-poor areas, the idea is that in time it will move to other areas.

Rhoda Grant has a brief supplementary on that point.

Evidence that we have taken suggests that, although the expectation is for abatement from the national retrofit programme to quadruple between 2013 and 2017, there is no corresponding increase in the budget. Given your comment that the programme will focus on hard-to-treat houses, one would expect the cost of any abatement to rise. How will you meet those targets?

The point is that, when the scheme begins, abatement will be at a relatively low level and then build. Obviously, the emissions reductions that we get from measures will continue for a period of time; in other words, the benefit that you get from them in the first year will continue for a number of years—indeed, for the life of those measures. As I have said, one would expect abatement to build up over time.

So you are not actually increasing the number that you do even if the cost is increasing. That is the point that I am trying to make. We are talking about hard-to-treat houses. You get an amount of money that treats a number of buildings in year 1. In year 2, you move on to the harder-to-treat houses, but the same amount of money is still supposed to achieve the same amount of abatement.

I would not expect the properties to get dramatically more difficult over the first few years. They will vary from area to area.

There is a general move from the lower-cost measures such as loft and cavity wall insulation, which are the most cost effective and reduce carbon the most for the least amount of funding, towards the more difficult measures, because we have already done much of the loft and cavity wall insulation. However, the abatement that we got from previous years simply continues and is added to each year as we do more properties.

There has been quite a lot of success, as I hope that we can all agree. Obviously, we all want to do more in the area, although cash and budgetary restrictions make that difficult.

The national retrofit programme builds on a successful area-based programme—the universal home insulation scheme—that has offered more than 700,000 households advice and assistance. Over the past three years alone, 122,000 homes have received energy efficiency measures through our fuel poverty and energy assistance programmes. The national retrofit programme also builds on successful area-based programmes that have already resulted in more than 400,000 households throughout Scotland benefiting from cavity wall and loft insulation in the past four years.

We also invested £150 million in fuel poverty and energy efficiency programmes between 2009 and last year, with an estimated net gain in household income of £700 million and a saving of 3 million tonnes of CO2. We have allocated £68 million to tackle fuel poverty in 2012-13 and made £20 million available over two financial years for a green homes cashback voucher scheme. I do not have ministerial portfolio responsibility for those measures, but we all recognise that a lot of successful effort has been devoted to helping to make real improvements to people’s homes. We want to see more of that, but we must also recognise that we cannot magic money. We cannot go up to a cave and get lots more money.

I cannot remember Opposition parties making the matter a particular issue in the recent budget negotiations. If the Government is to be criticised on these budget lines, it is fair to ask where were the suggestions from Opposition parties that we should devote masses more money to such projects and which other budgets would be cut as a result. We do not know, because we did not hear any of that.

We are not expecting you to magic money and we are not asking you to magic abatement. We want to know where the abatement comes from, because the figures do not add up at all.

I will add a couple of points. The 400,000 loft and cavity wall installations that the minister mentioned were from the CERT programme, which works alongside the UHIS programme.

On the overall level of funding, the idea is that the NRP will combine with funding for the energy companies to get an annual funding pot of around £200 million, which was the sum of money for which the committee called last year in its work on fuel poverty. It is a substantial sum of money and will have a powerful impact.

I will move on to questions about biomass. Is that permitted?

Bear in mind that the next item on the agenda is specifically on biomass. However, it is certainly relevant to decarbonisation of the energy sector, so there is no reason why you cannot ask a question now.

Environmental groups such as Friends of the Earth have expressed concern that there is not enough indigenous wood fuel biomass supply to meet the potential demand in Scotland. What plans or strategies are in place to ensure that subsidising biomass plants does not involve harmful deforestation in other countries? What plans are there to boost wood production in Scotland, to make up the shortfall?

10:30

Part of the answer to your question is the decision that I announced relatively recently in relation to the consultation on renewables obligation contracts as they apply to biomass. The consultation’s outcome led to my taking a decision to set a threshold to limit the capacity of biomass plants in respect of electricity-only generation to 15MW. There is no such restriction in England, south of the border.

Our approach recognises that the use of biomass for generating electricity only must be balanced. We recognise the interests of timber growers, who want other markets and sources of business, and we know that there is a growing need for high-energy-use businesses to try to reduce their costs. Whisky producers, paper mills and other large consumers of energy have an interest in biomass schemes.

Our decision recognised that locally based biomass schemes should be encouraged. There has been great success in that regard in Scotland, especially in the Highlands. Biomass can use parts of the forest that are not otherwise readily commercially usable and thereby provide an extra income stream for timber growers. The balanced policy that we have brought forward meets the needs and desires of timber growers. If timber growers are to plant more trees, they need to be able to make a profitable trade. They can do that if they get another source of business, and they are getting another source of business from us, as a result of our balanced biomass policy.

You are right, in that we must properly assess the likely supply of wood in Scotland and take account of the situation elsewhere. A lot of work has been done in that regard and I assure you that a great deal of time and effort was devoted to the matter prior to the announcement of my decision. Detailed submissions and statements were obtained from the Forestry Commission and its officials and the Scottish Government and its officials, and the conclusion was that there should be sufficient material to accommodate the needs of the panel products sector, the sawmilling sector and the biomass sector.

The timber sawmilling sector, which includes companies such as BSW Timber, James Jones & Sons and Gordon Sawmills, in Nairn, in my constituency, has served Scotland well for a long, long time, and we want that to continue. In the panel products sector, Norbord is an important company in my constituency and in Plean. We recognise the sectors’ needs, and we engage with and consult them and others.

These are matters of balance and there are difficult decisions. I am not saying that there are no conflicts; there are conflicts. However, I hope that we reached a balanced decision on promoting the use of biomass—incidentally, I think that we helped with the possible creation of new plants in the north-east, I think in Mr Adam’s constituency but not far from Mr Robertson’s constituency, which put in views to the consultation and which would generate substantial new employment as well as cutting energy bills for major existing employers in the area, thereby making a major contribution to this country’s economy.

I remind members that the minister will return to the committee, I think in two weeks’ time, to give evidence on the Renewables Obligation (Scotland) Amendment Order 2013, which covers the very issue that we are talking about.

Well, you have had a sneak preview. [Laughter.]

Thank you.

I will ask more about biomass when the minister returns to the committee.

I will move on to renewable heat. The committee received evidence that the current financial climate is a significant barrier to the development of district heating schemes. What is the Scottish Government doing to overcome that barrier and to support local authorities in championing district heating?

I am sorry, but I did not quite catch the barriers to which Margaret McDougall was referring.

I was talking about the economic and financial barriers. It is very costly to set up a district heating scheme. The example that was given was the Aberdeen district heating scheme, which was set up 10 years ago. If it was proposed to set that same scheme up today, it would not happen because of the cost implications.

Cost is certainly one of the factors. The expert commission on district heating has provided the Government with its recommendations on action on a major move to district heating in Scotland. I attended some of the commission’s meetings and we owe a debt of gratitude to all its members.

A number of recommendations are in progress and we will publish a formal response shortly. To respond directly to Margaret McDougall’s question, we have put in place a number of financial supports. Access to the district hearing schemes is available under the renewable energy investment fund, which is £103 million. We have made it clear that we wish to promote district heating using the REIF. The £50 million warm homes fund has also set district heating as a priority. In addition, in 2012-13, we announced £2.5 million for 10 projects to be funded by the district heating loan scheme, and awarded £2.67 million in Scottish Government grant funding to three demonstration projects that will accelerate the expansion of district heating in Scotland.

I hope that we might get the opportunity to debate district heating on the floor of the Parliament. As Margaret McDougall has indicated, and Alison Johnstone indicated in the recent debate on the committee’s renewable energy inquiry recommendations, there is a strong cross-party consensus that we should encourage district heating. Scotland has a long way to go with that. We are far behind Denmark, although Aberdeen has led the way along with one or two areas, such as Glasgow, where we have seen progress of late. Much more is to be done.

The prizes for ordinary consumers will be great. If people who are sitting in leaky, poorly heated flats in tower blocks throughout cities in Scotland can get access to district heating, their lives can be transformed, their bills can be reduced and much more energy efficiency can be created. As I said during the recent debate, that is best illustrated by the story of one lady who is a tenant of one of the district heating schemes. She explained that, after it was installed in her tower block, her flat was not cold so she did not have to wear her duffel coat indoors any more. I cannot think of a more powerful argument for district heating in Scotland.

What information do we have on district heating schemes that have been installed in public buildings such as hospitals and universities?

That is a very good question and the expert commission considered it in detail. If we think about it thematically, if we want district heating in Scotland, and a source of heat is provided, it is sensible to use it to the maximum. If one can combine a district heating scheme for a tower block with an adjacent or nearby public building so that both buildings are heated by the same scheme, that would be the best of all solutions.

I am not a technical expert. The expert commission considered the issue and perhaps we need to debate the idea in more detail. However, to get there with district heating, there needs to be close joint working between public sector bodies, utilities, the Government, tenants, and local authorities. We need to bring all those people together around the table to work out how best to deliver the schemes. The prizes are enormous and Margaret McDougall is exactly right to ask about the schemes.

We have not really done very well in Scotland on this as yet. Much more progress is still to be made, but I think that we all recognise where we are and where we would like to be.

The RPP1 milestone was for at least 100,000 homes to have adopted a renewable heat technology system. Is that achievable?

District heating schemes can often be renewable and so will contribute to that target but may sometimes be gas, although they could become renewable later. We think that the 100,000 figure is broadly consistent with our target of 11 per cent of heat coming from renewable sources by 2020. Given the existing arrangements for the UK-wide renewable heat incentive scheme and the various other pieces of assistance that we can offer, we should be able to achieve that objective.

We also want to look at how we can go beyond that. We think that that is probably a reasonable trajectory out to 2020, but there is a big challenge about what comes next. That takes us into the area of further promoting renewable heat, both domestically and potentially in service and manufacturing properties. Developing that more widely will be a big challenge beyond 2020. We know what we need to do before that, but we also want to roll things out beyond that.

I may be able to provide a little more flesh on the bones of Mr Wilson’s answer. Under RPP1, the 100,000 homes target was to be achieved by 2020. That assumed large-scale uptake of solar thermal panels, biomass boilers and heat pumps. According to the Scottish house conditions survey, by the end of 2010 around 13,000 homes had some form of renewable heat. By the end of 2011, progress meant that around 20,000 homes used solar thermal panels, biomass fuel or heat pumps. Therefore, considerable progress has been made, but there is some way to go.

Marco Biagi has a brief supplementary.

I have a supplementary on biomass in RPP2, so it is relevant to Margaret McDougall’s question. In the RPP2 projections, what method is used for accounting for carbon emissions from biomass? That may well be a technical question for officials.

We will need to come back to you in writing on that.

You can get back to us on that.

I have a couple of questions on reducing energy demand and on delivery and governance.

SSE’s evidence raised an issue about the lack of permitted development rights for air-source heat pumps and solid wall insulation. Clearly, some people might find it off-putting that they have another form to fill in; I believe that people in England and Wales do not. We also heard evidence that some—not all—private rented sector landlords are slow to implement energy efficiency measures and that broadening the permitted development rights might encourage them to do so. Do the witnesses have any comments to make on those two issues?

I think that Mr Wilson is better placed to answer the question from a technical point of view.

I saw that comment in SSE’s evidence. Clearly, the planning systems are different in Scotland and down south, but we are not aware that the hypothetical concern that has been raised is a major and widespread concern. We do not think that the Scottish process is necessarily more onerous or difficult, but we are looking into it and will address it if we can, just as we made changes to the planning approach on microgeneration and other schemes. We are on the case and will clarify the position as soon as we can.

Will RPP2 include policies and proposals to encourage private sector landlords to implement energy efficiency measures in the flats that they rent out?

We are considering minimum standards for energy efficiency in the private sector, which is a proposal in the current RPP, and we are setting up a working group to consider setting standards for the private rented sector and the home-owner sector. That might help to encourage private landlords to take up measures in addition to the existing incentive schemes that have been mentioned.

On delivery and governance of the policies and proposals, Dr Sam Gardner and Dr Mark Williams both highlighted the need for robust monitoring. What arrangements are in place to monitor delivery and the effectiveness of the policies and proposals?

10:45

The principal monitoring involves an annual assessment of whether or not we are achieving the statutory targets that have been agreed by Parliament. There are a number of measures within that to track progress against particular milestones in the various sectors that are contributing to the total. We have a range of measures to assess the extent to which we are moving positively towards delivering on our progress on the energy side—for example, on our 100 per cent renewables target or the renewable heat target. It is a mainstream part of our business in implementing the measures—whether they are in energy, housing or transport—to assess and monitor our progress towards delivering the emissions abatement that the document sets out. Each part of the Government and each portfolio minister will be doing that as a normal part of their responsibilities.

There are also programme-management arrangements within the Government, in particular the emissions reduction programme board, which is chaired by the director-general for enterprise, environment and digital. That brings together all the directors—my equivalents—across the Government, with their particular responsibilities. We meet regularly and assess progress on a range of policies and progress towards turning the proposals in the document into policies.

Last year, Audit Scotland made an assessment of the process that we have put in place. We responded to that and have made changes to ensure that the monitoring system is as effective as it can be.

In particular, and as we have discussed with Sam Gardner and others, we are working on improving our annual publications while acknowledging that, officially, there will not be another RPP until the next set of targets is set, which will be in about five years. However, we publish an annual climate change report, which is lodged with Parliament. We will increase the reporting in that document and will set out how we are progressing on each area of the RPP, to ensure that there is full monitoring of progress and full transparency.

We are getting towards the end of our time. Chic Brodie has a question on energy demand, and I, too, have a couple of questions.

I agree that the private sector has a huge role to play in supporting the policy on reducing energy demand. Some weeks ago, I was asked to look at a prototype information and communication technology system that measures the efficiency of public sector buildings. It covers a range of things including maintenance. One element is energy efficiency. The prototype addressed activity in one particular council, where the situation was, to be frank, appalling. Mr Wilson mentioned the emissions reduction programme board. Perhaps you can tell me where in the document RPP2 reflects what national Government and local government are doing to drive up energy efficiency in their own buildings.

A significant amount of activity is under way. I do not have the statistics to hand, but all local authorities and most public bodies have had assessments. In particular, carbon management plans have been developed with the Carbon Trust in order to assess the extent to which energy efficiency savings and improvements in the quality of building stock can be made.

Is information on that available?

There is a report by the Carbon Trust that summarises the work that has been undertaken by public bodies and the scope for further development. There has been significant progress, particularly in the health service, with improvements in the energy efficiency of hospitals and other facilities, but significant further progress can and must be made to contribute to the targets.

The report assessed the potential obstacles and barriers to making improvements; rarely is the barrier such that an improvement is not worth doing. The energy efficiency savings that can be made in public buildings are usually worth doing and are commercially and economically efficient. Inevitably, there is budget constraint and competition for sources of funds, but ensuring that our public buildings are as energy efficient as possible is very much a priority.

Do you agree that if we drive that priority, it will be easier to convey the energy efficiency message to the private sector and the domestic sector?

There is a strong role for the Government and the public sector as a whole to lead by example. All public bodies are obliged to do so under the climate change duty in the Climate Change (Scotland) Act 2009. However, we are keen to encourage use of mechanisms by which we can offer support, advice and encouragement to ensure that the various savings can be implemented.

I have a couple of questions to close with. On decarbonising of the electricity sector, as we know there is a proposal for the EU to have a 30 per cent emissions target reduction. If the EU does not agree to that, will it still be possible to meet the emissions targets for electricity? If not, what alternative approach does the Government propose?

One of the first lessons that one learns as a minister is that one must be careful about answering hypothetical questions. Obviously, we have discussions with the EU, and the First Minister recently met Commissioner Oettinger during his visit to Scotland.

We believe that the EU will take a progressive approach; we work towards that objective, as I am sure the UK Government will. Meantime, we deal with the position as it is and the cards that are in front of us with the powers that we have. I think that our approach has been recognised by a number of leading commentators as being world leading, which is a matter of some pride for Scotland. We will continue in the same vein and, together with our UK partners—we trust—we will encourage the EU to adopt an equally progressive approach. We will see what happens; if the gloomy prognosis that Mr Fraser outlined comes to pass, I am happy to come back to the committee and answer questions.

Okay. On that issue we are keeping our fingers crossed.

Another issue on which you are perhaps keeping your fingers crossed is CCS, which we touched on briefly last week and which Marco Biagi raised earlier in this meeting. We heard evidence last week from the power companies that CCS technology is very much at the experimental stage and that it may not be capable of being developed at economic cost, but RPP2 sees CCS as being absolutely essential, although we do not know whether it will happen. What is your plan B if CCS technology cannot be developed at economic cost?

We need more powers in Scotland over CCS, and we want it to proceed and be adopted. From a meeting with John Hayes, my understanding is that that is also what the UK Government wants—that is what he told me at the meeting. Again, convener, it seems that you are postulating a hypothesis that is not based on any factual evidence.

To be fair, minister, that is what the power companies told us at the committee meeting last week when they were sitting in the seats that you are sitting in, so it is hardly a scenario that I have plucked from the air.

I am not sure that what you said was an absolutely 100 per cent accurate characterisation of what was fairly complex evidence last week—no doubt we could debate that further.

Of course we recognise that there are challenges under CCS. However, with respect, to put the notion that the technology is totally untried and untested is to put the situation crudely and to present a false picture. I say that, having met companies that are extremely sophisticated in their use of CCS technology and which are—I believe—in the course of applying it elsewhere in the world. I do not think that the convener’s thesis is correct: CCS is not entirely untried and untested. I am, however, not an engineer in CCS, so it is not really for me to speculate on it.

However, if you really want to pursue the matter of CCS in a serious way—I assume that you do—my recommendation is that you seek advice from Professor Stuart Haszeldine and other world experts on the topic. Perhaps you might want to do that to get to the bottom of this, convener. The last thing we want is misinformation based on the false proposition that CCS is wholly untried and untested and will not work. That is not what the UK Government is saying. Of course, there are challenges, but I say once again that it would be unwise for me to speculate about what is going to happen at some distant date. As Yogi Berra said,

“It’s ... dangerous to make predictions, especially about the future.”

Thank you, minister. I refer you to the evidence that we heard last week. It is clear from what you have said that the Scottish Government has no plan B.

Is not it rather ironic that you are grandstanding this morning about delay and prevarication on the part of the UK Government when there is a huge gaping black hole at the heart of your own proposals? If CCS technology is not capable of being developed at an economic cost, as we heard last week, you have no way of meeting the targets that you are setting yourselves.

This is not an issue for Scotland alone. As I argued in the committee last week, it is difficult for me to see how emissions targets could be met if there were no commitment to CCS in Scotland, the UK and Europe. CCS is the sine qua non of meeting the targets and there is public policy support for it across these islands. The proof will be in the decisions not of the utilities, but of the UK Government. Will it support CCS or not? It has not done so in the past, but there has been a continual tale of woe, which I could set out, although that would be an abuse of my time here. The proof of the pudding will be in the eating.

We have an investment hiatus at the moment. The question for ministers is about what they will do with the powers that they have. We do not have the appropriate powers—the UK Government has them but is not using them to advance either CCS or renewables at the moment. I hope that it will.

When the Scottish Government, of which you are a part, set the targets, it was very much aware of the constitutional and political framework. Are you now telling us that the targets were a mistake?

No.

You are the one who is saying that you cannot do it and it is all the fault of somebody else—it is either the EU’s fault or the UK Government’s fault. Why did you set the targets if you did not have under your control the levers to ensure that they were met?

It is perfectly reasonable for us to assume that carbon capture and storage, which is a technology that is supported in the UK, will be implemented. That is the position. If the UK Government was saying that it was against CCS, your question would be reasonable.

It is nothing to do with the question of political support for CCS; it is down to whether CCS is feasible at economic cost. We heard in evidence last week that it might not be. I am simply asking you that question and you do not have an answer for me.

I do have an answer, actually. I co-chair with Mike Farley and Graeme Sweeney—who are leading experts in the topic—the Scottish Government energy sub-group on carbon capture and storage and thermal generation. With respect, convener, I have spent tens of hours on the topic and can guarantee to you that CCS can work and will work.

At economic cost?

If there is the political will, it can. It must be tried out first, though. That is a proposition to which the companies involved will testify. We saw Wavegen withdraw because, it appears, of uncertainty over EMR and the lack of a public policy solution from the Government that has the responsibility and the power—namely, the UK Government. My worry is that the continuing lack of a conclusion on existing policy powers that the UK has in relation to CCS is certainly not helping and might threaten some CCS projects, as it has done in Peterhead and Longannet in the past, given how they were taken forward. I hope that that will not happen.

John Hayes assured me just a couple of weeks ago that he and the UK Government are committed to making CCS happen. The benefits for the UK economy would be considerable, given the supply-chain opportunities for a very large number of companies that are recognised as having a history of international excellence in engineering. CCS is a glittering prize as well as a good thing for the environment and the planet.

Okay. I thank you and your officials for coming along this morning and for your evidence to the committee, which was very helpful. We will have a short suspension to allow a changeover of witnesses.

11:00 Meeting suspended.

11:06 On resuming—