Official Report 520KB pdf
Welcome back to the meeting. We have with us Paul Wheelhouse, the Minister for Business, Innovation and Energy, who is here with officials from the Scottish Government: Chris Stark, who is director of energy and climate change; Mike King, who is an economic adviser; Sue Kearns, who is head of electricity; and Kathie Robertson, who is head of the heat, energy efficiency and low-carbon investment unit. I welcome all our guests.
I will start by asking about emissions reductions. The emissions reduction that is planned for the transport sector is 31 per cent to 2032. Emissions are a big issue for our country’s health, especially in certain areas. For example, St John’s Road in Corstorphine here in Edinburgh is one of the most polluted roads in the country. Has a realistic target been set? How will it be achieved?
I thank you for the invitation to appear before the committee. Transport is an important area, in which we acknowledge that we have to make more progress. We are working to deliver effective solutions. Through using the TIMES model, on which my colleagues can provide technical background, we have looked at cost-effective pathways to deliver our emissions reduction targets to 2032 and beyond to 2050.
In the past, there has been a great challenge in the transport sector. Vehicle emissions have reduced and vehicle emission standards have improved dramatically in the motor vehicle manufacturing trade, but that has to some extent been offset by an increase in the use of vehicles. People have cars with more efficient engines, but they are driving further than they did previously, which has to some extent cancelled out the efficiencies that technology has generated.
We have to look at alternatives for delivering transport emission savings. One of the key ways in which we can do that is by decarbonising the vehicle fleet so that, if people continue to drive, that does not add significantly to emissions in the way that vehicles do at present. The strategy places a lot of emphasis on electrification of the vehicle fleet.
That is not to ignore the important work that we are doing to promote the use of hydrogen. We are doing excellent work at Fife energy park and in Orkney as part of a project that involves working in partnership with the European Marine Energy Centre and local interests to develop the use of hydrogen for storage and in vehicles. The project in Orkney is looking at the ferry fleet, and the work in Fife is focusing on council vehicles such as Kangoos, Transits and refuse collection vehicles.
We are doing a lot of work to pioneer new technologies and alternatives to diesel and petrol. Equally, we are keen to advance the uptake of electric vehicles in the Scottish fleet. Our ambition is that, by 2030, just over 40 per cent of new vehicles that are bought will be electric or hybrid. That is consistent with the pathway to which you referred, which sets out an emissions reduction target of more than 30 per cent for the transport sector.
Is that target achievable?
We are working in the current context, in which there is a balance of devolved and reserved powers. Some powers over transport are reserved, so we are making assumptions about what is achievable at a UK level and about what more we can do to increase the use of electric vehicles—for example, through the extensive roll-out of electric vehicle charging points. Scotland is doing really good work on that; we have a well-developed network of rapid charging points for electric vehicles.
Through car clubs and other means, we can do work on the infrastructure side to support people to change behaviours and to increase the use of electric vehicles. However, we must bear it in mind that we do not at present have all the tools in our box to influence those things.
We have been realistic about what we can achieve, and the target will be challenging. I know that Humza Yousaf and his colleagues in the transport team would say that the figures that we have set out are challenging, as they are, but we have to be ambitious if we are to achieve the scale of emissions reduction that we need across the economy. We should bear it in mind that, if we do not make progress in transport, some other part of the economy will have to pick up the additional emissions reductions that are required.
You talked about moving people to electric vehicles, but the energy has to be produced somehow. Will it come from sources that do not produce carbon emissions?
In the draft energy strategy that supports the climate change plan, we have taken a whole-system approach. We are looking at the supply and use of energy. You are right to highlight that, as we electrify transport and heat—some aspects of our heat supply will have to be electrified when other solutions are not appropriate—demand for electricity will grow. That is why the strategy looks at supply and at the need to invest further in renewable sources of electricity and in supporting technologies such as pumped storage hydro, to ensure that we have the capability to deliver the electricity that our economy will need, whether that is for transport, heat or our wider electricity needs.
In the electricity section of the plan, policy outcome 1 states:
“Scotland’s electricity grid intensity is below 50g CO2 per kilowatt hour”.
One of the related policy development milestones is that the
“UK Government delivers a viable route to market for a wide range of renewable technologies”.
Some witnesses have pointed out how reliant we are on the UK or the EU to make some things happen. I am interested in your views on how dependent we are and how much is under our control.
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Electricity generation is probably the easiest example to use in that respect, because the key financial instruments that influence the deployment of renewables are very much within the Westminster Parliament’s control.
For the large-scale deployment of offshore wind, for example, the contracts for difference auction process allocates funding to projects, and the Scottish Government has no direct input into that process. We are therefore at the mercy of UK ministers on the financial instruments to support the sector.
A key area in which we have had fundamental change in the environment in recent years is onshore wind. There is currently no subsidised route to market for new onshore wind projects that are coming on stream. It is worth putting that in context. More than 11GW of renewables projects have been going through the consenting process in Scotland, so there is a strong interest in investing in Scotland, but there is no route to market—there is no guaranteed price to underpin a long-term investment decision. That is destabilising for the industry.
There is also no route to market for pumped storage hydro. There are agreements with National Grid, which are regulated by the Office of Gas and Electricity Markets, on providing energy from existing pumped storage facilities such as Foyers and Cruachan. Such facilities help to balance the grid and are heavily used to ensure that the electricity that comes through the network to consumers is of good quality, is reliable and does not create fluctuations—members might sometimes notice fluctuations in lighting, where they are more obvious, because the lights flicker. To avoid such fluctuations and ensure that there is quality supply and sufficient black start capability in the event of a power outage, pumped storage hydro is important.
We have massive investment projects lined up—in Coire Glas, above Loch Ness, and in Dumfries and Galloway at Glenmuckloch—which will go ahead if there is a route to market. Each project is worth hundreds of millions of pounds, but we need a route to market.
We have encouraged the UK Government to think about a cap and floor mechanism that is similar to the one for interconnectors, so that developers have some certainty that the price will be within a range—it might not be guaranteed, but there are upper and lower levels, so developers know that their investment is relatively secure. That is what the industry is looking for. We need UK ministers to be expansive on that front.
We recognise that the UK Government has, in its view, an electoral mandate not to subsidise new onshore wind energy projects. We think that there is strong support for projects in Scotland from communities that want them, and the solution is to encourage the UK Government to allow a zero-subsidy CFD auction process to take place. That would involve no public subsidy whatever, but there would be a guaranteed supply of electricity at a guaranteed price, to allow sufficient certainty for developments to take place.
We have some influence over how we support community-led schemes. We are doing work through the renewable energy investment fund and the community and renewable energy scheme, which is a fund that we use to support communities to develop the feasibility of projects. We provide support to the planning system in relation to community projects, to enable renewable energy sources to be deployed, but it is unfortunate that the financial instruments are under the UK Parliament’s control.
You are saying that on the community side of things we have a lot more influence, but on other areas you put arguments to the UK Government, which it might not accept. I am not taking issue with your arguments but, if the UK Government does not accept some or all of them, will our targets and aims be put at risk?
I can say explicitly that there is no doubt that it is becoming more challenging to meet our 100 per cent target for 2020, but we are still pursuing that aim and pushing for it. We have invited the industry to feed back to us—through the consultation on the draft energy strategy, which sits alongside the climate change plan—its thoughts on how best we can deliver a zero-subsidy onshore wind industry, which would be a UK first.
We are inviting people to come forward with ideas on how we can deliver projects. That is about the Government working with industry to identify ways of eliminating costs. There are exceptional costs that affect sites around the UK—for example, some relate to the Ministry of Defence and NATS, which is national air traffic control services.
When we can have a direct influence—for example, in relation to the planning system—we try to be supportive. We also encourage the industry to consider the potential for repowering existing sites and extending the life of sites. An extension to life might help by proving that the cost of the asset can be recovered over a longer period, which reduces the requirement for subsidy.
We are working with the industry and asking what else we can do if the UK Government does not come forward with a more supportive environment. We have invited comment on the potential role and remit of a Government-owned energy company and of renewable energy bonds to see whether we can finance projects in other ways. We are always open to constructive input from the industry about how the Scottish Government can influence that.
We continue to press the UK Government to come forward with more positive policies that accept that there is a stronger case in Scotland for supporting renewables projects. We are in the fortunate position that, by virtue of having a higher-than-average wind speed in Scotland—particularly around our remote islands—than in many other parts of the UK mainland, we have efficient sites that are very competitive. If there were a zero-subsidy CFD auction, we are confident that Scottish projects would do well, because they are economically strong projects from an efficiency point of view.
Another area in which we need a more supportive environment is transmission charging. As we have seen—not just with the premature closure of Longannet but with the renewables industry—an unfair charging regime for projects in Scotland has a profound impact on their ability to compete in an auction process. The higher price that they pay perhaps reflects an older model of electricity generation that was about big thermal plants providing power and exporting it to England and other parts of Great Britain.
You have listed quite a number of areas in which we need the UK Government to change policy or whatever. Do you hope to get results for all of them? Do you feel that there is an open door for some areas, while others have a closed door?
I could go on to discuss other areas, such as tidal energy, but I am conscious that I am eating into the committee’s time. There is indeed a long list of areas for which we have asked for a more supportive position from UK ministers.
It was helpful to have the recent debate to get strong support for renewable energy from political parties in the Scottish Parliament and to put forward the message that we need UK ministers to listen to and support the industry more when they can. We do not expect a free lunch; we know that, ultimately, consumers pay for their electricity. However, the context is of a strong and long-term commitment being given to a new nuclear power station—Hinkley Point C—for electricity at a price that is higher than the price at which onshore wind is already providing electricity to the grid. There is already a differential of at least £10 between the power that will be purchased until 2025 from Hinkley Point C power station and onshore wind, which came in at £82.50 per megawatt hour in the most recent CFD auction in which it competed.
Onshore wind is already cost competitive and we are making a commonsense argument to UK ministers to support those industries and to support their development in areas where they are supported by communities—that applies in many parts of the UK and not just in Scotland. If UK ministers allow that to happen, they will diversify the risk of higher prices. They have a nuclear commitment with a stronger electricity strike price, and that should be mixed with technologies such as onshore wind and solar. I am confident that offshore wind will also come down significantly in price, as will tidal and wave slightly further down the line.
We are encouraging UK ministers to ensure that they are taking full account of the cost-reduction trajectory of those technologies. If they back those industries and get economies of scale, there will be significant reductions in cost. We see that with offshore wind now; some sites in the Netherlands and other places are coming in at well below the target prices that the UK Government has set in its CFD auction process. The UK Government needs to back those industries and reap the supply-chain benefits that come from that.
Nuclear facilities have been commissioned. We have nothing against using technology from abroad but, when we have the ability to support domestic industries—whether that is tidal energy or offshore wind—why are we not doing that? That is a gilt-edged opportunity to generate jobs in fabrication, as well as to generate electricity from a sustainable source.
I am curious about energy efficiency measures. The goal for residential energy efficiency is a 6 per cent reduction in heat demand. That is a smaller and slower goal than getting all homes to an energy performance certificate C rating by 2025, which was what the fuel poverty forum recommended. Do you not accept the forum’s recommendation?
We are very supportive of improving the energy efficiency of our stock—let me make no bones about that. However, we are trying to deliver a pathway that is cost effective and deliverable. In recent years, we have had challenges in trying to convince house builders—in, to be fair, a very tough economic climate—to make a leap of faith and start moving towards higher energy efficiency standards for new builds. We can, nevertheless, work with industry to achieve that.
As you will know, we face a big challenge with the existing building stock, but we have done very well in rolling out energy efficiency measures such as cavity wall insulation as well as more traditional insulation products to more difficult-to-treat properties such as rural properties with solid wall construction. If we were to focus purely on making all the building stock energy efficient to a certain standard, we might eliminate options that could be more attractive or cost effective for particular buildings. In places such as Inverclyde, I have seen the impact that a district heating project can have in reducing the cost of energy for residents and tenants in a large high-rise block. Our approach needs to be sophisticated enough to take account of the context in which we are trying to achieve energy efficiency.
Therefore, I am not resistant to the improvements that are being pushed for, but, as we have set out in the energy strategy, we have been making steady progress on the average energy efficiency rating of our building stock over time and we need to take a more balanced approach.
It sounds as though you are not going to go for that recommendation. Not resisting it is slightly different from being whole-heartedly in favour of it.
I would not want to shut off any option. This is a draft energy strategy and we are genuinely listening. If the committee and the industry feel that the energy rating is achievable and are able to convince us, we will be keen to listen to that argument.
Do you think that the 6 per cent energy efficiency target that you have gone for is sufficient to end the poor energy performance of homes?
It is not sufficient in and of itself. We still need to invest in the roll-out of energy efficiency measures. Targets in themselves are just a means of measuring progress; we need to back them with investment, which is why Scotland’s energy efficiency programme is a national infrastructure project. If the budget is passed this week, more than £0.5 billion will be committed in the period up to 2020 to the roll-out of provisions in the SEEP process.
Beyond that, we are looking at a multibillion-pound programme over more than a decade to achieve the quality of building stock that we think the people of Scotland deserve. We also want to work not just with domestic properties but with non-domestic properties, which can be challenging. In new towns such as East Kilbride and at other locations where a lot of buildings have been built at roughly the same time, we know that a huge number of non-domestic properties are in need of investment to make them energy efficient. That is both a problem for local authorities and an opportunity, in that they might be able to roll out a programme with relative efficiency over a larger number of building units. Because the buildings are all of the same type, they might learn a lot from working on the first one and be able to make efficiencies and economies of scale in working on subsequent buildings.
We have a live consultation on SEEP and we are looking for input from the industry and from stakeholders such as the Poverty Alliance on how we can achieve our goals. I ask Kathie Robertson to say something about the technical parameters of the target and the deliverability of the energy rating.
About two thirds of our residential properties have achieved the EPC standard. As the minister has said, the next tranche of properties to be addressed will be the harder-to-treat properties, which are often in rural and more remote areas. Alongside the challenge of energy demand reduction, there is a big challenge in ensuring that people—particularly more vulnerable people—have the best energy prices and are paying a fair price for their energy. We are therefore looking at how we can make the best use of smart technology and at the roll-out of smart meters. People in Scotland are also not very good at switching energy providers, so, alongside trying to reduce demand, we are trying to encourage more switching so that people get the best energy prices.
The real test will be whether we actually improve the energy performance of homes. We could take all those measures and people might still remain in fuel poverty.
I have one small final question. Although a lot of the problem is in rural areas, there are also problems with private sector stock, and private sector rented stock in particular. Do you intend to introduce regulations on that? The proposals are a bit vague with respect to private sector tenants and owners, so could you expand on your plans for that?
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We certainly recognise the problem. Like many members round the table, I represent a rural area and I know that the issues there can be challenging. In some urban contexts, it might be easy—or easier—to roll out a large-scale programme, working with large-scale landlords such as registered social landlords and councils, although we have the issues of owner-occupiers and private rented properties among that estate, so it is more complicated than I am presenting. However, in the rural context, private rented accommodation is much more dominant, as you rightly say.
We have to look at a mixture of approaches. Where possible, regulation is perhaps a way of driving that. Obviously, we would have to be proportionate about that and bear in mind affordability. The benefit of taking a long-term strategic approach is that we can take a very long telescope, if you like, to look at where we are trying to get to. That means that we can bring people with us over a longer transitional period so that there is no overnight change and people do not have to do things straight away. People will upgrade and invest in their properties annually or at longer intervals. If we tell them that they have to get to an energy efficiency standard by a certain time, they will know that they have a long deadline to achieve that. We hope that they will be able to develop an approach that gets them to the destination in a cost-effective way.
There is a mixture of approaches, and we are considering regulation. We are also working with local authorities on the development of local heat and energy efficiency strategies. There is a separate consultation on that issue, which invites the Convention of Scottish Local Authorities, individual local authorities and wider stakeholders to give us their thoughts on what impact that might have by, for example, helping to support the development of district heating or perhaps connecting large industrial sources of heat to provide local district heating opportunities. Clearly, we will also encourage owner-occupiers and private sector landlords to get involved in that. In a mixed-tenure block, it certainly makes sense for everybody to be involved in and benefit from any efficiencies in procurement at that point, rather than having to do something separately, which might be a bespoke solution and which might be much more costly for them. We will also try to work with energy suppliers to encourage them to be involved.
In parallel with that, we have the roll-out of smart meters, which will certainly accelerate once we have SMETS 2—smart metering equipment technical specifications, version 2—meters, which are more technically advanced. Those are more attractive to the industry—and to consumers, in terms of switching.
Lots of things are happening, but you are right that we might need to provide a mixture of carrot and stick. However, we have to be mindful of affordability and of the need to give people as much notice as possible.
There is a plan to consult on the domestic private rented sector, which we hope will happen next month. That will give us an idea about timescales for consulting on the owner-occupied sector.
The climate change plan places quite a lot of reliance on carbon capture and storage and bioenergy. Carbon capture and storage is a core technology for delivering decarbonisation. You will know that Peterhead, which is in my area, was leading the way in developing that technology, but that the funding was pulled by the UK Government. If we were unable to rely on that, what would the implications be?
That is a very significant point. Peterhead is extremely important for energy supply in Scotland more generally. As I am sure that you are aware, we are steadily moving towards a decarbonised electricity system in Scotland, but at the moment Peterhead provides a very important function. It provides baseload power, which is important in its own right, but it also has black-start capability, which provides resilience in the energy system. Therefore, it is an important part of our infrastructure. We are trying to find a future for Peterhead that is genuinely sustainable and which fits with the low-carbon vision for our energy system.
I appreciate that CCS is not universally supported, but we believe that it is potentially a very important technology that would allow Peterhead to continue to provide power to the grid through sequestering carbon emissions from the plant. That might lead to a valuable industry that would use—not prematurely, I hope—decommissioned oil and gas infrastructure for storing carbon dioxide; indeed, there are in the central North Sea largely depleted oil reservoirs that might be suitable for storing carbon dioxide.
In section 7.2 of the draft climate change plan, we state:
“The United Nations Inter-Governmental Panel on Climate Change (IPCC), the International Energy Agency ... and the Committee on Climate Change have all identified Carbon Capture Storage as an essential lowest cost climate mitigation technology.”
Essentially, the IPCC and other parties are saying that
“it would cost 138% more to achieve a 2°C scenario without CCS.”
We think that that is a commonsense point of view.
Suspending my own political beliefs for a second, I think that, at the UK level, people should be saying, “This is an asset that can be used; the infrastructure is there to be used; and there is a power station that can not only provide power but do so while trialling CCS technology.” I certainly share the disappointment of local people in Peterhead—indeed, your own disappointment—at the plug being well and truly pulled from the plughole by the UK Government. Of course, that came after Longannet’s hopes were raised that it would be a site for CCS.
The constant chopping and changing of the UK policy position is destabilising. I do not think it appropriate for us simply to sit and expect the world to develop a technology that we can exploit, given that we have a gilt-edged opportunity at Peterhead to do it. If we do not do it, there is a risk that some of the offshore infrastructure arising from the decommissioning of mature fields will be lost to us. There is therefore also a timing issue to take into account, and there is an imperative to get the technology up and running and to ensure that it contributes in the way that the Intergovernmental Panel on Climate Change and the International Energy Agency believes that it will in helping the world keep to a 2°C or less scenario. It will also reduce the cost to the economy of achieving that trajectory.
For all sorts of reasons, therefore, I think that the UK policy position has been extremely short-sighted. When research funding was pulled from wind energy, we saw Germany and Denmark exploit the technology—and good on them for doing so, because we have definitely needed it. However, CCS should have been a UK-based industry. In CCS, we have an opportunity to develop a technology that can help the world deal with the issue and to reap the economic opportunity that will come from that. I just hope that the UK Government sees sense.
Will the Brexit situation have an impact in terms of the university research that could be carried out to make up for UK research funding being pulled from carbon capture and storage?
Ultimately, we need demonstration projects. There are different scales of project that can be undertaken. With the convener’s permission, I might bring in Chris Stark to talk about this, because I know that we have looked at what has been done elsewhere.
The fact is that we have to demonstrate the technology and, as with the renewable technologies that I referred to earlier, demonstrate how costs can be brought down and how the technology itself can be made cost effective. I accept that it will not be cheap to start with, but it is a worthwhile commitment that will ultimately help not only the UK and Europe but the wider world community achieve the reduction in climate emissions that we need to achieve.
I stress that we are very much supportive of renewable energy. We are pushing renewables in a big way in Scotland, and we are encouraging the UK Government to do more than it is doing on the matter, but I think that not only the whole of the UK but Europe and the wider world need CCS to be deployable. What will be the solution for the many countries around the world that do not have the renewable energy opportunities that the UK and Scotland have? How will they lower their climate emissions if they are reliant on fossil fuels for energy generation? We need to help, and we can play a vital role in that respect. At the same time, we can generate export earnings from the knowledge, expertise and technology that we build up.
You are right that access to European funding is important across all areas of energy research and development. We perform very well in attracting funding from horizon 2020 and other European funding sources. Our universities are foremost among the academic community in Europe, and they lead in areas such as marine energy and CCS, in relation to which academics at the University of Edinburgh and other institutions are very proactive.
I would like to bring in Chris Stark to add to that.
I do not have much to add, except to say that I think that it is credible that carbon capture and storage can play a part in the future. We were all stung by the decision to pull the funding for the competition, which we were very hopeful that Peterhead would benefit from. The energy strategy, in particular, reflects that. We are looking at small-scale demonstration, at least in the interim, but with a clear view that it should grow in the 2020s and 2030s to become something that plays an equal part in the energy system. It is essential that we work with the UK Government on that.
There is real stuff going on at the moment—we have put real funding into real projects in Scotland for CCS. We will contribute to the consultation that the UK Government is running on its industrial strategy to make the point that carbon capture and storage should be an equal part of that strategy in the future.
You are involved in the TIMES modelling. If CCS were taken out of the equation, what effect would that have?
We can manage without CCS; it is just that it will cost us more. The primary issue for the model is to achieve the targets at the lowest system cost, which might be thought of as the lowest cost to the whole economy in Scotland. It is perfectly possible to achieve those targets without CCS, but with CCS, we have the ability to achieve them with a cheaper system cost overall, so it makes sense to include it. The modelling that underpins that finding is the same modelling that my colleagues in the UK Government will use when they think about the future, so we would expect the same arguments to apply.
Minister, before we move on, Schleswig-Holstein, where much of the German renewable wind energy is from, is not looking for independence from Germany, although it has not always been a part of Germany. Do you agree that a stable political system is also helpful in this area?
A supportive political system is very helpful too, is how I would put it, convener. I bow to your superior knowledge about the location of the technology in Germany, but I believe that support is what we have to have, and I have believed that since before I took this post. I met a number of key industry players when I was at my first climate change conference, in Doha in 2012. They all said that what was attractive about Scotland was having a long-term commitment and stable policy position on the issue. There was certainty about the Government’s commitment to the growth of renewables—the well-known 100 per cent target for 2020 and a very supportive environment around it.
Whether Schleswig-Holstein will become independent or not, I am not sure, but I am sure that as long as supportive policies and the right fiscal and regulatory regime are in place, we will continue to see investment. International players recognise that Scotland is among the most progressive administrations anywhere in the world in terms of support for renewable energy and I think that that is what they are most attracted to.
My point was that Schleswig-Holstein is not looking to be independent, but we will move on.
Getting back to Scotland, minister, you touched briefly on the thermal generation of electricity. I think that the Scottish Government has expressed a desire to see new thermal capacity, to provide
“base-load capacity and support the resilience of the electricity system”.
We have heard evidence that suggests that investment is unlikely to come in the near future, due to transmission and infrastructure costs. We have also heard from National Grid that it could meet the peak demand from the UK grid through the interconnections that either are, or shortly will be in place. Given that, why is new thermal capacity considered to be strategically important? Under what scenario do you consider that Scotland would need the new thermal capacity?
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The first thing to say is that we have thermal capacity, at Peterhead. There was a capacity auction, which was unsuccessful from the point of view of the operators, who have been unable to secure a contract. Our first priority is to ensure that there is a long-term sustainable future for Peterhead.
As you know, a number of sites in Scotland, such as Longannet and Cockenzie, have been vacated. In the case of Cockenzie, there is planning consent for a new thermal plant. It is right that transmission charges have been cited as a key reason why new thermal capacity will not come forward at the moment.
For the reasons that I gave earlier, whether we are talking about pumped hydro storage or thermal capacity, we will see a growth in the requirement for electricity in the Scottish economy as we decarbonise the vehicle fleet and our heating systems. We need to provide reliable, secure sources of electricity. Thermal has a role in that mix. We have never been of the view that we should have a one-technology energy supply, and we have always pushed a range of technologies.
Peterhead has a particularly important role from the black start capability point of view. We need a range of thermal plant around the GB system, to kick-start the system and get the grid back up and running in the—I hope—unlikely event of a black start. Thermal is an important part of the mix, and the loss of Longannet has been significant in that respect.
We support the establishment of new thermal capacity in Scotland. We put in place measures that would require such generation to be capable of deploying CCS, to ensure that it does not become a net addition to climate change emissions. In response to Gillian Martin, Chris Stark talked about the impact of CCS and bio-energy and made the point that they help to get the electricity generation sector into negative emissions. That is where our mix has to be if we are to deliver on the pathway in the climate change plan, so it is important that thermal capacity is capable of being adapted, to reduce the risk of it adding to emissions.
We face the barrier of unhelpful transmission charges at this time. National Grid and Ofgem are looking at the transmission charging regime, reflecting that we have moved to a more distributed electricity generation model and that the current regime perhaps reflects the old system, in which a number of large plants largely exported electricity to the rest of the GB grid.
National Grid made the point that it is unlikely that every generational asset in Scotland would go down at the same time, so there would be some residual power. It also said that it has enough energy, through interconnectors, to get the grid started again. Do you take a different view of the technology?
No, no. I was not disagreeing with National Grid. On a day-to-day basis there is enough power in the grid and we have interconnection to Europe, which tops up the energy supply in the UK from time to time.
In relation to offshore wind, we are seeing a lot of development off the coast of England. I am not objecting to that in principle; the sites are good and cost competitive, so it is a good thing. However, we would argue that all our eggs are in one basket and we need a more diverse range of sites, including offshore wind sites in Scotland. We are pushing floating offshore wind for the same reason. The wind will always be blowing somewhere in the British Isles—I am sad to say, although it is a strength in this context—and we need to be able to benefit from that.
We saw that there was a problem with capacity in France when a large number of nuclear plants were lost simultaneously because of a common safety issue—in most cases the loss was precautionary but the issue hit supply and there was a shortfall. Severe weather events can take out interconnectors and grid infrastructure. The picture is complex. I agree with National Grid that there is enough power in the grid on a day-to-day basis, but as electricity demand grows we need to future proof the supply and provide appropriate back-up.
I think that National Grid was saying that there is enough power not just on a day-to-day basis but for a black start, as I think that you called it. Do you disagree with National Grid on a technical basis, or is it just that you want to have a thermal plant here?
We are doing a lot of work on grid resilience with National Grid, Scottish Power and Scottish Hydro Electric Transmission.
A report that has been commissioned and which will, I hope, be published in the near future will lay out the position with regard to security of supply at GB level and Scotland’s place within that. I do not want to prejudge that report, but I believe that we need, first, to invest in maintaining Peterhead and ensuring that it is not lost to the GB grid and, secondly, to consider the options for establishing CCS-enabled thermal capacity.
Obviously, for that to happen, we need the UK Government to continue to pursue a CCS agenda, but it is important that we consider what we need for the long term. The situation might be okay at the moment, but with the electrification of transport and heat, we will need more, not less, electricity, and this will become an important issue.
Did you say that you were going to invest in Peterhead?
As you know, this is a reserved area, but we are looking to work with SSE to see whether there are any ways in which we can help. Clearly we want to secure a long-term future for that plant and to work with the company and, indeed, National Grid and Ofgem to ensure that that happens. There is a desire to work together on this issue, and we will work with UK ministers on it, too. There is genuine partnership, and I hope that UK ministers see that, no matter whether we are talking about Scotland or other parts of the UK, they need to ensure that the electricity supply network is resilient for the future and that we do not have to rely overly on one form of technology—whether it be that used at Hinkley point, offshore wind or whatever—in one part of the country. We need capability to ensure that we have a resilient electricity grid for the long haul, and we will work with the industry and our counterparts in the UK Government to achieve that.
You have said that you are aware that the present transmission charging mechanism is detrimental to Scotland. In a wider context, the UK is obviously looking at thermal installations for strategic reasons, because if we look at what is coming into the UK from abroad, we could ask whether we need any thermal capacity.
Given that London and thereabouts are presently paid to connect to the system and that those areas that are further away from London are charged to connect, if the wooing that you are currently engaged in to get a fairer charging system in the national grid fails, will the Scottish Government consider taking over Peterhead for strategic reasons? There has been chat about the Scottish Government being involved in the energy business and, in any case, we should be looking at putting in place a strategic supply, given that, as I understand it, we are not on a UK basis able to maintain levels of supply with any surety.
I have to say that we are not there yet. I understand the point that is being made, and the importance of Peterhead to Scotland’s needs, certainly for the near future, cannot be overstated. We need a plant such as Peterhead to provide both power for the network and that black start capability. Pumped hydro and other such areas are very important in kick-starting thermal plants and getting them up and running, but it is those thermal plants that really carry the weight of getting the grid up and running again once things have been fired up. It is very important to us.
As for the transmission charging regime, you are quite right to say that in certain parts of England new projects are being paid to connect to the grid. Such are the peculiarities of the regime. We, on the other hand, see substantial costs for plants; for example, I am sure that members are aware that Longannet faced an annual bill of about £40 million to connect to the grid and that that played a big part in its premature closure. Although in the longer term we are trying to decarbonise our energy mix, as set out in the energy strategy and the climate change plan, I have to say that that was an unhelpful development in its own right and it happened so precipitately because of the financial pressures caused by the transmission charging regime. The Scottish Government has made those points very strongly to UK ministers in the past, and we will certainly consider what we can do to support Peterhead. I do not want to prejudge anything, but I will say that we have a strong strategic interest in ensuring that Peterhead is kept up and running.
It is a real issue that the regulatory regime and transmission charging mechanisms are purely cost driven, rather than taking into account the socioeconomic aspects of what the electricity infrastructure—the grid—provides. In Scotland, we have 32 per cent of the UK’s landmass but projects that are in that area are faced with an unacceptably high barrier in connecting to the grid. To go beyond thermal into areas such as offshore and onshore wind, those technologies have to start from a position where they have a higher cost than their competitors in the auction process—if there ever is a zero-subsidy CFD auction process for onshore wind—before they even start to put anything in the ground.
The transmission charges are unhelpful because they do not allow sites in Scotland to compete on a level playing field with sites elsewhere. As I said, fortunately, wind sites in Scotland are particularly good in terms of their efficiency—the capacity and load factors are higher than in many other parts of the country—which to an extent counteracts those higher charges. However, for thermal, we do not have that advantage. If a site is burning coal, oil or gas, that is the same coal, oil or gas that is being burned elsewhere, so there is no efficiency advantage in that respect to overcome the unhelpfully high transmission charges in Scotland.
I can assure the member that we will do whatever we can within our powers to help to maintain the resilience of the electricity system in Scotland.
I think that you dodged the bullet there a wee bit, and that was my real question, so I will ask it again. From my point of view, there is no UK grid—that is clear given that those mechanisms are in place. Is there any legal impediment to the Government investing in energy? Is there anything that prevents you from doing that?
I will defer to colleagues on the legal aspects. I certainly did not mean to dodge the point that I think that you are referring to, so I will just answer that while I have the chance. At the moment, I believe that there is a 5 to 6 per cent capacity margin in the GB electricity grid. In other words, on balance, we produce about 5 or 6 per cent more than we need. Therefore, National Grid is right that, at peak, we can usually cope, and that has not been a problem to date. In the last year for which we have figures, Scotland exported 29 per cent of the electricity that we generated, so we play a particularly important role in maintaining that capacity or safety margin at GB level. The loss of plants such as Longannet, which has come off the grid since those figures were produced, chips away at the safety margin at GB level and not just in Scotland. We obviously need to address that concern and we have raised it with UK ministers and National Grid. Clearly, we want to support the maintenance of such facilities in Scotland.
On the legal aspects of whether we could intervene to shore up a particular plant such as Peterhead, I will now carefully give a hospital pass to Chris Stark, who might be aware of the legal aspects.
There are barriers to any form of state ownership in any market, most of which are presented in the state aid framework. The other barrier or hurdle—which is probably a better way of considering it—is the regulatory one. In the scenario that Mr Paterson has presented, we would have to have a licence to generate and be part of that market. It is worth noting that Ofgem has made an offer to us to consider some of those things. There is a commitment in the energy strategy to consult on what we have called a Government-owned energy company, which could take many forms. It is good to have it on record that there is a good record of partnership working with the regulator, and we will explore that issue with it. It has offered what it calls a regulatory sandbox, which is a good term, to consider some of the regulatory aspects. The short answer to your question is that it is possible.
Thanks very much for that.
We will move on from the sandbox to questions from Andy Wightman.
12:30
I have three questions on the residential sector and heat. The target for the residential sector is a 76 per cent reduction in emissions by 2032. Areas including transport and agriculture are taking much less strain, but by 2032 they will account for 33 per cent and 26 per cent of emissions, respectively. Given that the emissions figures for transport and agriculture have been predicated on inputs to the TIMES model, and that constraints have been placed on expectations about, for example, demand reduction in transport, to what extent are we placing unreasonable expectations on the residential sector to reduce carbon emissions?
I recognise the issue. I may ask Chris Stark or Mike King to comment on the TIMES model. I think that emissions from agriculture are not picked up by the TIMES model; that analysis has had to be separate from the TIMES model, which is focused primarily on energy aspects. Emissions from agriculture are difficult to model, in that respect. However, if Fergus Ewing were here, he would tell you that the emissions from agriculture have been on a steady downward trajectory; we are saying that we need to see that continuing over the period of the climate change plan.
I hope that we can deliver emissions reductions in the residential sector in a way that helps to save people money and makes people less exposed to fuel poverty, through SEEP—which Jackie Baillie touched on—and through tackling the energy efficiency of our housing stock. I also hope that we can, beyond the residential sector, help businesses to improve the energy efficiency of their buildings by making them more fuel efficient, which will save them money. Another very important aspect is that improved health and other benefits will come from people having warm, dry and well-heated homes.
We are trying to find ways to encourage people to be part of the process. We have had some successes in recent years, through the work that has been done around “Low-carbon Scotland: A Behaviours Framework” by the “greener together” team in the Scottish Government. That work has considered how we can, through good practice, incentivise and encourage people to do the right thing. In the residential sector, we are dealing not only with properties but with the transport side of things, so we have to encourage people to change their vehicles to lower-emissions vehicles. We do not have at our disposal direct fiscal tools for that, so we must provide other incentives and we must provide the infrastructure of a network of charging points to support that change.
We are going to have to be positive in encouraging and helping individual householders to lower their emissions. We recognise that that is a pretty hefty challenge, but we always knew that it would get more difficult as time went by. The importance of achieving the target cannot be overstated, though. If we do not achieve it, the impact on our environment and the global community could be devastating. We are trying to encourage people to do the right thing, but we must provide a cost-effective way of doing it and we must help private householders. The consultation that Kathie Robertson referred to will try to unpick how we can incentivise people in the private rented sector and make it easy for them to take part in the roll-out of energy efficiency programmes.
I am conscious of the time, so I will move on to my second question, which is on heat. Policy outcome 1 for the residential sector seeks improvements in the fabric of Scotland’s domestic buildings resulting in a 6 per cent reduction in their heat demand by 2032. I understand that that 6 per cent reduction is a reduction in forecast demand in 2032 as opposed to a reduction from any baseline demand figure. Can you clarify what that means?
Kathie Robertson will address that because she will have studied the figures more carefully.
I will pass the question over to Mike King. I think that the target is based on where we are now, moving forward to 2032.
The target is a 6 per cent reduction from the starting period to 2032. It takes account of the demand drivers in the residential sector going forward, as well.
So, if the demand today is 100 per cent, in 2032 demand will be 94 per cent.
Fabric measures will reduce overall demand by 6 per cent on forecast 2032 levels.
What is the forecast demand for 2032?
I do not have the figures with me, but we can write to you with them.
Thank you. It would be extremely helpful if you could do that.
I will move on to my final question. The reduction in carbon emissions from the residential sector towards the end of the period relies heavily on technological solutions. On low-carbon heat technology, RPP2 said:
“We intend to produce a detailed proposal on how we may realise this potential in RPP3.”
Table 8-7 in the draft climate change plan—which is, in effect, RPP3—says:
“We will look to put forward a more detailed proposal on how we will realise this potential in subsequent Climate Change Plans”.
Are you ever going to do that, given that you made a commitment that you would do it in RPP3?
I acknowledge the point, because I was involved in RPP2. At that time, we faced the challenge that the technology was not available, but we knew that research was being done. A lot of work is being done to pilot technologies through the low-carbon infrastructure transition programme and SEEP. I visited a project covering Edinburgh, East Lothian and Midlothian that involves Sunamp, which is an East Lothian based business that is providing heat-battery storage. Big steps forward are being taken. Many properties these days have combi boilers and therefore do not have the capacity to store hot water, so it is necessary to be able to store heat in another, space-efficient way. We are supporting companies to develop new technology in that area. I reassure Mr Wightman that significant funding is being put into that research and development. I hope that we can develop technological solutions, but we will reflect on the point that he has made. If I or Ms Cunningham can provide any further detail, that might be helpful. Kathie Robertson might be able to say more.
As well as the climate change plan and the energy strategy, we are consulting on SEEP. In particular, we are looking at two aspects of heat. It is not a case of setting one technology against another. We are considering regulation for district heating and local heat, and we are considering energy efficiency strategies. Local authorities understand supply and demand in their areas, so they might be able to zone particular areas for particular heat technologies.
In the context of the climate change plan, as I mentioned earlier the focus between now and the mid-2020s is on demand reduction and no-regret or low-regret heat solutions. We are talking about solutions such as heat pumps for individual buildings in off-gas-grid areas. District heating could be used in areas of high heat density, where that makes commercial sense. Until we reach that point, we will not be sure what will happen with the gas grid and whether there will be any options in respect of repurposing or greening the gas grid. We want to be very sure that we understand what will happen across the UK before we push people or businesses into taking up particular technologies, with the possible result that they end up with a stranded asset or regret making that choice.
It is fair to say that we made it clear in “The Heat Policy Statement: Towards Decarbonising Heat: Maximising the Opportunities for Scotland” that we will need to use all the available heat technologies to meet our targets. When it comes to a specific focus on district heating, heat pumps and one or two of the other tested technologies, 2025 is as far as we can look at this point in time.
I will leave it there.
Gordon MacDonald will ask a short supplementary, after which we will move on to Ash Denham for further questions.
In the light of the pressure on time, I ask that answers be kept a bit more focused. There will, of course, be an opportunity to write to the committee on any issues that the minister or his officials have not been able to cover as fully as they might have liked to, and the committee might write to the Government for clarification of one or two matters.
How realistic is the target of achieving a reduction of 31 per cent in transport emissions between 2017 and 2032, bearing it in mind that, according to the latest figures from the Department for Transport, sales of ultra-low-emissions vehicles made up only 1.2 per cent of total sales in 2016, and that much of the responsibility for regulation in the area lies with the UK Government or the EU?
That will be a challenging target to meet, as I acknowledged earlier. Mr MacDonald is right to identify that different Governments are involved, and that the EU has a distinct role on oversight of emissions standards.
Around Europe, there are significant moves being made, including by individual cities within countries: for example, Paris has set a target to ban fossil-fuel cars from its environment by about 2020. I will check that and get back to the committee. In Norway, nearly 25 per cent of new-vehicle sales are of electric hybrid vehicles. Significant steps forward are being made.
I admit that the UK figures for take-up of electric vehicles, and those for Scotland within the UK, are lower than I would like. We want a significant step forward to be made on that, over time. For that, we need a supportive UK policy environment in terms of fiscal incentives. Thankfully, there is a fiscal incentive. We top it up—I will check the exact margin with colleagues because I cannot recall the figure. There is a loan of, I think, up to £35,000—I will check with colleagues about that—with a very attractive rate of interest, to help people with the cost of an electric vehicle. On top of that, there is support from the UK Government through a reduction in the overall price.
We are trying to support an increase in sales and we have an aspiration for electric vehicles to account for more than 40 per cent of sales by the end of 2030. That is not unrealistic, given that Norway is already into the 20 per cents. We just need UK and Scottish policy to work in concert to achieve it.
The roll-out of the rapid-charging infrastructure is going well. I hope that the infrastructure will provide people with the confidence that they need to use that fleet, so that they do not have range anxiety about being unable to complete their journeys. With improvements in battery technology, that problem is largely becoming a thing of the past. Over the time to 2030, we will see steps forward in the technology such that people will be able to drive similar ranges as they do now with fossil-fuel cars. I anticipate big strides forward in battery technology, but we will also have infrastructure where people need it in order to charge their vehicles, as well as support for the cost of buying or leasing a vehicle.
The objective is that by 2032, 80 per cent of domestic heat will come from low-carbon sources. However, at the moment, 80 per cent of households are using gas for heating and only about 2 per cent are getting their heat from low-carbon sources. Therefore, in effect, the objective is to reverse that position by 2032. That is really ambitious. What do you envisage the mix being? How much will come from electricity, how much from hydrogen in the gas supply and how much from zero-heat homes?
That is an important question—it is probably one of the most important ones. The general thrust of the draft energy strategy is to try to achieve, on heat, an ambition of the scale of the one that we have achieved on electricity. More than half our energy consumption—54 per cent—is for heat, so it is a huge issue for us.
We recognise that we need to deploy different technologies and different solutions in different areas of the country. At the convention of the Highlands and Islands yesterday, stakeholders said that it is necessary to have the flexibility to provide solutions that match circumstances including building stock, rurality of location and access to infrastructure. To start with, not everywhere is on the gas grid. Those are all inhibiting factors for which we have to come up with solutions. In cases where it is not already happening, the solution may be to move away from solid fuel to electrification of heat. In other cases, the solution will be a district heating system.
Kathie Robertson and I have referred to the consultation on potential regulation of the district heating market. I should say for the record that investors are, if I judge by my interaction with the industry, showing extremely strong interest in district heating in Scotland: they see London and Scotland as the two places in the UK to which to go to invest in district heating. There is the right combination of Government support. The regulatory environment is emerging, so investors have confidence that there is an appropriate mechanism to help district heating to happen.
In Scotland’s case at least, there is potentially also a strong partnership with local government to make district heating happen. I am sure that there is in COSLA a strong interest in the agenda, but I want to put on the record that there is also strong investor interest. There will probably be substantial investment in district heating but that will not cater for the majority of properties. We need to be realistic about that.
12:45In the longer term, hydrogen has the potential to replace domestic natural gas, and there is an opportunity for the oil and gas industry and other players to get involved in that. That is one of the reasons why we have such a firm commitment in the energy strategy. The oil and gas industry has a role in the low-carbon transition because it has the skill sets, the infrastructure and—in some cases—the technology and the expertise in natural gas to support that. Before coming into this role, I had not appreciated that before I was born—I do not want to overstate my youth, because I am clearly not as young as I used to be—we used to have town gas with hydrogen in it. Hydrogen has been used before in Scotland in the domestic context and could have a rebirth through providing an alternative to natural gas as a heating fuel.
We are encouraging people to take part in the SEEP consultation on aspects of energy efficiency, as well as in the consultation that Kathie Robertson referred to on district heating and local heat and energy efficiency strategies. It is really important for us to get industry engagement on the sort of supportive environment that we need to make it all happen.
You mentioned district heating. One of the policies on that is the district heating loan fund, from which local authorities and housing associations can apply for money. Is that mainly for retrofitting or for new builds, or for a combination of those?
I am open to suggestions. Until now the fund has largely been for retrofitting, but I am aware of some proposed projects that are a mixture, for example where there is a new development adjacent to an existing development. I met one potential developer who was looking at an existing development where the roll-out of a district heating package could also benefit other households. I have encouraged industry to look at opportunities to design that in for new builds and to think about how they can benefit the existing community, so that it is positive for an existing community when a development is happening in the area and, rather than a new housing estate being plonked next to it with no benefit for it. There are a lot of upsides to that approach and we are certainly not against it in any way—we encourage it.
We heard that the take-up of the loan fund has been a bit lower than expected. Why is that, and is it a concern?
We are certainly funding innovative projects in that area under a number of different headings and LCITP, SEEP and the district heating loan funds all contribute to that. It might be that there is more activity than is visible through one particular fund. Perhaps Sue Kearns or Kathie Robertson want to comment on the other funds that are being used to promote energy efficiency projects and, specifically, district heating projects.
Innovative district heating is being funded under the low-carbon infrastructure transition programme, as the minister said. There are some innovative schemes coming out of that, as well as wider local energy systems, and funds are going in. The way for the future is that, when we look for innovation, we will not look for standard loans. Instead, we will look largely towards grant programmes in the first instance and work towards commercial projects in the longer term.
I think that the River Clyde Homes project that I referred to earlier was funded under that route. Tenants I spoke to had had a very modest bill of, from memory, around £50 to £70 for their entire heating bill for the period of three months prior to my visit, which was just before Christmas. They were very happy tenants—put it that way.
I want to follow up on the point that the energy strategy should be seen as part of a wider business and industrial strategy, which I agree with. Given that, why is the Scottish Government proposing significant rate increases for renewables projects and companies around Scotland? I understand that Scottish Renewables has written to the Scottish Government highlighting concerns about the proposed increase to business rates. In some cases, the increase is fivefold and puts into jeopardy the commercial viability of projects. Does the minister agree with and share the concerns that were expressed by Scottish Renewables?
I am not denying that that is an important issue—I will come on to it—but the valuations that Mr Lockhart referred to are set by the assessors. It is with relief schemes and in setting the poundage that the Government comes in, as I am sure Mr Lockhart knows. Projects with a significant community component benefit from a relief scheme on business rates, so they should not be affected in the way in which Mr Lockhart describes, and very small projects with a low rateable value benefit from the small business bonus, too.
However, I appreciate that, in the draft valuations that the assessor has put forward, there have been some significantly higher valuations. We have been engaging with Scottish Renewables and the industry on that, and we have also been feeding that into Mr Mackay. I know that he is listening carefully to those concerns, and I hope that we will be able to address them in due course.
We are encouraging any business, regardless of whether it is in renewables or in the wider economy, to take advantage of the appeal process that will be available to it between the issuing of the finalised valuations in the middle of March and September. We encourage any business that believes that it has been treated unfairly in the valuation to take advantage of the ability to appeal to the assessor. Where the assessor has used estimates to reach a valuation, we encourage businesses to use actual data for their project, perhaps to demonstrate that there has been an overvaluation of the asset.
I hope that there is a positive option in the pre-existing appeal process, but I also hope that we are demonstrating that we are a listening Government that is listening to the industry, and that that will help to alleviate concerns in the area.
As these projects tend to cover large areas and have a large footprint, they are more likely to be covered by the large business supplement. Is it fair for renewables companies to be subject to a tax that is, in effect, double the tax elsewhere in the UK?
We should bear it in mind that the process that we are going through is exactly the same as in the rest of the UK. The assessor’s role is to come up with a valuation and, as I said, there is a mechanism by which valuations can be challenged. Obviously, larger projects have larger sites, and I accept that there are likely to be higher rateable values in that situation. However, I think that, at the upper end, on the larger sites, there is a smaller increase in the draft valuations than exists at the lower end of the spectrum.
As we set out in the energy strategy, we are trying over time to encourage developers to consider shared revenue models with the community, to engage with the community and to take a genuine look at community ownership options and shared investment. The Government helps communities to take those opportunities forward through the renewable energy investment fund and the community and renewable energy scheme. Where that is possible, the community projects become eligible for rates relief.
There are different ways for developers to attack the problem, but we certainly encourage them to engage with the assessor. I know that, quite often, assessors are willing to meet businesses informally to discuss their concerns about valuation and, I hope, address them without the need to go to a formal appeal, which is more expensive for businesses. I know from having been up in Aberdeenshire recently that the assessor there is keen to engage with businesses informally and see whether there is a way in which they can tackle the issue. If not, the business always has the right to go to appeal anyway.
We are looking seriously at how rates interact with renewables. I have been encouraging the industry to feed into Ken Barclay’s review during the consultation to ensure that any such issues are taken into account, because the objective of that exercise is to have a rates regime that is supportive of economic growth.
I have two quick questions on the supply side. I go back to Ash Denham’s question about the switch in heating sources from 80 per cent non-renewables to 80 per cent renewables, which is a fairly phenomenal change. The depiction that has been presented to us by witnesses in previous evidence-taking sessions is that you seem to be jogging between now and 2025 and sprinting flat out between 2025 and 2032. How on earth do you expect the low-carbon technologies industries to build the capacity and have the skill sets to deal with that kind of schedule? Would it not be better to maintain a reasonably average speed throughout the period?
There is always a challenge when we are making a long-term shift in something as significant as this, but we have to give a signal and allow the industry’s capacity to build up. We cannot expect it—to use Mr Leonard’s analogy—to go immediately into sprint mode from day 1, or at least into a canter, if I can mix my modes of transport. We need to build up the capacity of the construction industry and the skilled trades. We had a huge contraction in many aspects of the skilled trades during the housing recession from 2008 onwards, and the industry is taking time to recover and invest in apprenticeships and in building up the skills that are required to roll out the technology.
If we were to rush at the fences—to return to the cantering analogy—we would end up having inflationary pressures, given the industry’s limited ability to respond to growth. That might make it less cost effective for us to roll out the technology that we talked about with Mr Wightman, which is still being developed, to a degree. We are demonstrating the technology, through LCITP and SEEP-funded projects, which will help us to understand which technologies work best, are most cost effective and have the biggest impact on household savings and climate emissions.
It is not unrealistic to expect that it will take a few years for us to get to the position of having a steady-state industry that can go on at a pace, scale the walls and get us to the target. However, we have to give a strong signal, for reasons to do with aspects of society, which I touched on in response to Jackie Baillie. We need to give private landlords and private occupiers time to prepare and a long timescale in which to achieve the objective.
Is there a forum at which you can sit down with the industry and its trade unions to plan the implementation of such transformational change?
We engage with trade unions and the industry, although probably not in the way that you described—albeit that we are open to doing that. We certainly need to understand the skills aspect from the perspective of not just the college sector but trade unions and the workforce.
I have said in the Parliament that we want to honour the commitment that we made during the passage of the Climate Change (Scotland) Act 2009—you and I were not members of the Parliament at the time—to take society with us on the journey and not to break the economy in the process of making the transition to low carbon.
We have to help employees in the high-carbon areas of the economy to transition to low carbon. Through the likes of the transition training fund in the oil and gas industry, we are providing opportunities for people to retrain in fitting smart meters for the electricity system and opportunities to get apprenticeships and new skills, so that they can be employed in the area.
I appreciate your point. In an ideal world, it would be nice to have a smoother trajectory. However, we must first overcome the capacity issue, and we cannot expect industry to respond quickly and immediately. We must also allow time for the regulation and other aspects to emerge and be put in place to help to drive the market, and we must allow time for COSLA and other partners to develop strategies at local level.
On a different issue, at the weekend CS Wind UK announced that it is planning to make 60 people redundant from its plant at Machrihanish. Have you spoken to the company? Do you intend to take action?
Yes, I have spoken with the company on a number of occasions, including in my office in the Parliament building last week, when we were trying to identify ways to prevent job losses. I think that the company has a sustainable future; it is sad that there is a short-term issue as a result of the sudden changes in policy position on onshore wind, which have dried up the onshore wind market to some extent. Also, the emerging offshore wind market is such that it is proving challenging for supply-chain companies to be cost competitive in the context of the CFD auction process, when a developer can lose a bid on the basis of 1p per megawatt hour. In my view, that is a crazy way of doing it; more account should be taken of the supply-chain impact on the economy. We are encouraging UK ministers to be more expansive in the area.
I assure you that we will work closely with CS Wind to identify anything that the Government in Scotland can do to help it. That includes looking at how we can support the supply chain and support innovation, to help the company to become more cost competitive with yards in Spain, for example, where there are significantly fewer state-aid considerations. The very high level of unemployment in Spain is such that there is a stronger market argument for intervention there than we can make in the context of our relatively tight labour market in Scotland—I stress that that is not my view; it is just the state-aid environment.
I assure you that we are working closely with the company, as we speak, to try to help it and that we will support the workforce, which is important to the Argyll economy.
I thank you and our other guests very much for coming to the committee today.
Thank you.
12:59 Meeting continued in private until 13:03.Previous
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