Official Report 310KB pdf
This is the sixth meeting in 2009 of the Economy, Energy and Tourism Committee. Item 2 is evidence taking as part of the committee's energy inquiry. We will concentrate on issues to do with changing consumer behaviour and energy efficiency in industry and the public sector. A member of our first panel of witnesses, Dr Jillian Anable, has been making every effort to get here but is caught up in problems on the railway network—it is slightly ironic that she has transport problems, given that she is a senior lecturer in transport.
I am the managing director of Renew Services Ltd. I was told that I could make a short introductory statement.
Yes—please be very brief.
I will be brief. We are a co-operative energy services company, which is owned by the customers and communities that we serve. We started out working with one local authority and one housing association. In the main, we fund combined heat and power and district heating systems. In our first year, we were involved in £40 million of projects; we expect the figure to double next year.
I am here specifically to talk about smart meters and the role that they can play in reducing overall energy demand.
My association has been involved in an energy efficiency group. We fitted a ground-source heating system in our community centre and we are involved with the Alness transition towns group.
I am the senior policy adviser for Sustainable Development Commission Scotland, which is the Government's independent adviser on sustainability.
I should have reminded members, witnesses and members of the public to switch off all mobile phones and BlackBerrys. Such devices should not be left on silent mode, because they interfere with the sound system.
A plethora of bodies is involved in awareness raising. We are concerned that accessing advice can be confusing for consumers. What are the panel's views on specific action that would take us closer to a one-stop-shop approach to energy efficiency? Would there be merit in merging the Energy Saving Trust and the Carbon Trust, as has been suggested to us?
There would be merit in a joint operation, if not in a full merger. We are involved with local energy networks, which bring together a range of energy users in one area. Currently there is a demarcation line: the EST advises the residential sector and the Carbon Trust advises the industrial sector and the wider public sector. There is a need for much more joined-up thinking, and a joint operation to inform and develop local energy network opportunities would be fantastic.
As has been stated, the Energy Saving Trust and the Carbon Trust perform slightly different functions and have different target audiences. There are issues to do with having a coherent approach for whichever parts of society are trying to access energy information, and potential for greater co-operation probably exists. However, I am not sure that that necessarily means that the two bodies should be merged.
I have a question for Jennifer MacLeod. When you started your work in west Alness, what bodies did you meet or seek help from?
Initially, we worked with Jon Priddy, who is now with Community Energy Scotland—before that, Community Energy Scotland was the Highlands and Islands Community Energy Company. We also worked with Helen Houston and Ross and Cromarty Enterprise.
So you worked with the local enterprise company.
Yes. We received funding from the community economic development fund and the body that has become Community Energy Scotland.
The point is that you have had to deal with a range of different bodies.
Individuals do not know what there is to learn from people who can help them. They think that they know all that they need to know, but they may not know how to set their heating controls properly. Many people have not known how to do that and have saved energy just by learning how to do so from someone who has simply gone into their home.
I want to follow up on Jon Cape's answer and ask a little more about where the issues might lie in considering the lack of joining up, if you like, between publicly funded bodies. In your experience, are there specific things that cause delays or duplication of work in dealing with carbon reduction?
By definition, local energy networks need to bring together disparate stakeholders. What we are talking about is quite new to public agencies, private energy users and tenants and householders in communities. They need to get their heads around quite new ways of doing things. If a local energy network serves them all, there will be many mindset changes to make.
Are those bodies too centrally controlled? Where they operate in localities, do their officers have local discretion? Can they operate with local partners without having to check back with the head office?
I think so. I would not make criticisms in that sense. It is more a matter of policy leadership and changing mindsets so that people think of local energy networks as being mainstream rather than oddities. In Finland and Denmark over the past 30 years, local energy networks have become mainstream. We must change mindsets so that people are used to such an approach.
Who should take the lead in ensuring that there is a better one-stop-shop approach for the consumer who is trying to find advice? Should it be the energy companies, the Energy Saving Trust, the Government or local authorities? Which bodies should be trying to make it easier for the consumer to find out what is available, and perhaps even promoting that? One of the big issues is that too many bodies are involved, and no one knows what they are doing.
Several panel members will probably comment on that. My view is that it depends on the consumer's circumstances. For example, they might live in an area in which strong community organisations—such as the transition town model, which has been mentioned, or the going carbon neutral Stirling project—are being resourced to provide support for local people. Those are examples of the best local provision of such support and guidance. However, that will never be the uniform picture.
I will move on to the issue of smart meters. Madeleine Hallward might have some particular things to say on the subject. There is a general recognition that smart meters are an important way forward, but how do we roll them out? That is the key issue.
To pick up on one of the points that Jennifer MacLeod made, people do not know what there is to learn. The smart meter is an important piece of infrastructure that can help people to understand how they can reduce their energy consumption and, therefore, their carbon emissions. With regard to the example that Jennifer used of people setting their heating controls, because people rely on estimated bills and meter readings, they are divorced from the impact of turning their thermostat down a degree or having the central heating on at a lower temperature for longer rather than a higher setting for a short amount of time. They do not—understandably—understand how those decisions affect the overall cost.
The key questions in relation to the roll-out of smart meters are around the decisions that need to be taken and who needs to take them.
As you might be aware, Lord Hunt said in October last year that the Government has decided to issue a universal mandate for smart metering, so that every home in Britain will have a smart meter by 2020. The industry was very pleased to hear that, and is keen to crack on with the work. We expect the roll-out to consist of a 10-year programme, and we are currently waiting for a mandate to be announced that will set out certain key criteria about how that will be implemented.
What are the key constraints in relation to, for example, availability of equipment and of enough people who are trained to fit new meters? Those issues need to be resolved, and action might be required from the Scottish Government to ensure that adequate training places are available and that businesses are supported to develop the technology to go with smart meters.
The key recommendations would be that a timely announcement is needed and that the Government must ensure that the policy statement about the mandate contains the four key elements that I described. Until we have that announcement, it will be hard to work backwards to determine what other processes or decisions are necessary.
I will add two comments on smart metering from Renew's point of view as a local network operator. First, the new regime should allow for local network operators to manage local metering as well as other services. Secondly, there has understandably been widespread concern about prepayment meters being at a higher tariff than other meters. The higher tariff is partly because there is genuinely a higher administration cost. There is a Scotland-wide scheme for smart payment cards that cover a range of different transactions for local citizens, and we are working actively on linking a smart prepayment meter—for customers for whom that is the right solution—to the local authority smart card system. That will make the admin cost more or less the same and remove the reason for the higher tariff for prepayment meter users.
The industry hopes that smart meters will enable customers to switch between prepayment tariffs and standard credit or direct-debit tariffs as they choose. It will not be necessary to change the meter to do that, which, as Jon Cape points out, will remove many of the additional service costs that lead to higher tariffs for some prepayment users.
Smart meters need smart consumers. In Britain, we apparently have a functional literacy rate of about 20 per cent and a large elderly population. I cannot programme the recorder for the television any longer—that has been the case for some years—and have grave doubts as to whether the consumer uptake on which you are banking will occur. There must be a degree of adaptation and tutoring for the people who will have to make the decisions. That could be a major problem, particularly among people with learning difficulties and the elderly. I cannot fathom what trying to instruct my 90-year-old parents how to handle a smart meter would be like.
Parallels can be drawn between the roll-out of smart metering and the digital switchover. The implementation of the smart meter programme will involve replacing 46 million meters throughout Britain and visiting about 25 million households. Accompanying that, there will need to be a public education campaign, just as there has been for the digital switchover. No matter what market model or method of implementation is used, that education campaign will be important. Suppliers will have to communicate with their customers about what having a smart meter means, what it enables them to do and how it can save them money or reduce their carbon emissions—they will decide which approach is most likely to tempt consumers into engaging with their smart meter.
Several of the points that I was going to raise have already been picked up, but I will follow on from Christopher Harvie's important point about education and tutoring. I will broaden the issue slightly. I have recent experience of a housing association installing air exhaust systems in some houses. That has caused several tenants problems, many of which have arisen because not enough time was spent with the tenants prior to the systems being commissioned, so they misunderstand how they operate. The issues can be complex. On the front of the main unit, which is about the size of an American fridge, apparently, there is a switch. If someone switches off the unit, that is an absolute disaster. The normal thought process that people go through is that, if they switch off their heating, they save money. However, if someone switches off one of those units, the next time that they switch it on, there is a huge energy cost for reheating the 70-odd litres of water that are in it. People who switch them on and off, thinking that they are doing the right thing, are suddenly faced with massive electricity bills. That is just one example of the problems—I am sure that there are many others.
I agree. That example shows how important it is to communicate with customers about what smart metering means and how it can benefit them. All our members are aware of the importance of doing that, whatever the implementation model is. The method of communication depends on whether the market model is a street-by-street model or a supplier-by-supplier one, and we are waiting for the decision on that. However, we are certainly aware of the importance of communicating with customers.
Somebody raised a point about the number of people who can install meters. That brings me to the broader point that, if there is a huge meter installation programme and other equipment is being installed at the same time, manufacturers and installers will be tempted to grab whomever they can to install the meters—people who might not be fully up to speed with the technology and might rush the installation because they will want to get as many as possible done. They might not have enough time, or possibly enough knowledge, to give the appropriate education and tutoring to consumers. Do any of the witnesses share that worry?
Definitely. Gas arrived in the west end of Alness about six years ago and there are still people there who do not know how to work the controls because they were not taught. Even if you show them what to do and give them the manual, a lot of people do not take in the information properly, although they think that they do at the time.
The point about the number of installers is important, and suppliers are aware of it. The number that will be needed partly depends on the market model, and that is where the planning stages of the roll-out become important, because that is when we will be able to calculate how many highly trained fitters we will need, how many there are already and how many people will need to be retrained. The industry is taking that into account and is aware of it.
I have a similar point about the wider canvas of smart meter roll-out. We are working hard in local authority areas. A new energy mix in a local area is a matter not just of doing the immediate projects but of thinking through what the mix between local energy networks is like, where the use of microrenewables is right and so on. Different skills are needed, as is work with colleges to build up those skills so that we do not get bottlenecks, which we can anticipate ahead of time.
On smart metering, which I am in favour of, I am not sure whether Madeleine Hallward will have an answer today, but what is the approximate unit cost for the manufacture and installation of a smart meter in a house? Although the market model has not been decided yet, does the Energy Retail Association have a view on who ought to bear that cost? Is it the consumer, the energy companies or the Government, or is it a blend of those?
The Energy Retail Association and its members have always said that the investment that is needed for smart metering will be an industry investment.
The consumer always pays in the end, but I hope that there will be savings in their electricity bills to cover the cost.
I will step back a little. Some questions were raised in the previous evidence session about the impact on consumers of carbon-saving technologies—or technologies designed for that purpose. I would like the views of the panel, perhaps starting with Phil Matthews, on the balance of policy prerogatives, which is part of what the committee needs to consider. There are a number of policy drivers, but perhaps the two crucial ones are carbon saving and fuel poverty. Those are not the same, and I am interested in your views on how effectively Government policy, both in Scotland and at the United Kingdom level, balances those two and whether we should consider smarter ways of combining them.
It is a big issue. You are right that they are not exactly the same, although action on fuel poverty obviously contributes towards meeting climate change targets. Our concern about the community actions that we are discussing is that the people who access grant funding and so on tend to be better educated and more affluent, while the people with most energy need in relation to fuel poverty have less available income to invest and possibly some limitations in going through the application process.
I suppose that there is a bit of a risk that, as smart meters allow people to get more energy use for their money, they might not necessarily reduce their carbon output. They might increase their carbon output, and those who are living in poverty will not necessarily save money. I am sure that Madeleine Hallward will have a view on that issue.
Smart meters are an enabling technology. The two-way, immediate, 100 per cent accurate information that they provide to customers on their energy use will mean that some vulnerable groups, such as elderly people on a fixed income who might be tempted not to use their heating throughout the day, might be given confidence to keep their heating on and stay warm and well over the winter.
Given our stakeholders, Renew was set up with twin fundamental objectives, which relate to both CO2 emission reduction and addressing fuel poverty. The best technical solution differs, depending on where someone is, and we basically make a broad distinction between reasonably dense urban areas and more rural areas.
In the west—I say that because we are on the east coast—the attempt to reduce carbon emissions is putting people into fuel poverty. Someone in Skye and Lochalsh telephoned me to ask for help because of a problem that has arisen there. A housing association is introducing renewable energy in its new houses but, until such time as the renewable system is on the go and more houses are built, which will bring down the cost, the small number of houses that have been built are running on oil, which is costing the people who live in them a great deal. The intention was good, and I am in favour of renewable energy, but those people have been put into fuel poverty as a result.
What will eventually be used instead of oil?
I think that there will be a woodchip-based community energy system. That will be wonderful but, at the moment, the people who have moved into the first batch of houses are paying a lot for their energy and were given no help in finding assistance.
That brings us back to the earlier questions about the co-ordination of different public agencies. Is there an institutional answer? Is there a way in which the different strategies of Government can work more closely together so that they do not create the perverse effect of pursuing one objective while damaging another?
There is a lot of good work—more than there used to be—with the climate challenge fund, the Scottish community and householder renewables initiative and other initiatives. To deliver strategies effectively, a coherent approach is needed from top to bottom, with leadership from national Government, local authorities and other public bodies, as well as physical incentives, advice and grants. As others have said, it is about hands-on interaction to explain the more complex aspects to people. Many of the levers exist in some form, but there is a need to draw them all together into a much more coherent package.
It has been suggested to the committee that there should be support for renewables—such as microrenewables—at the point of consumption through Government planning and development rights. The Scottish Government recently announced that such rights would be provided in some areas but not in other, critical areas. Does the Sustainable Development Commission Scotland have a view on that? We expected to hear from the Scottish Government about microgeneration of wind power last year, but we have just heard that it will not make a decision.
We are supportive of the principle of microrenewables. Some technologies are currently more effective than others—some need a bit more development. There are a lot of significant site-specific issues for microwind: it works very effectively in some areas of Scotland—if you put a turbine on a house in Lerwick, you will get a good payback—but in many other areas you do not necessarily get that payback. The media is covering many of those issues. It picks up positive and negative aspects of the technology, so people are often not clear about the best option for them.
But is it not for Government to give a lead? As advisers to Government, should you not be telling it, "Don't delay bringing in microwind, the development will happen"?
In some instances, microwind can play a role; in others, it may not be the appropriate technology because of the overall carbon footprint of the manufacturer and so on. There is huge potential in Scotland, particularly in off-grid areas but also in cities, for renewables more widely, such as ground-source and air-source heat pumps. We would like those technologies to be enhanced and supported by Government—they must be part of the future energy mix.
It is a given that the energy efficiency of microwind will vary from site to site, but do I take it from what you say that you think that the planning process has a role in establishing it?
Microwind in particular?
Yes. You appear to suggest that, because there are different levels of energy efficiency from microwind, it is appropriate in some locations but not others. The mechanism that currently establishes whether it is appropriate is the planning system. Is it right that the planning system should make such a judgment on a householder basis?
It is appropriate that microwind is subject to a planning decision, which also considers issues such as visual impact. My concern is about the energy and carbon gain from a micro wind turbine. There is good evidence that, in some areas, there is a substantive gain. It is a clean energy source that is generated within the home, so there are not the losses in distribution and so on that there are with other forms of electricity generation. In other areas, it may not be appropriate. There is a definite role for public bodies such as the Energy Saving Trust and the Carbon Trust in advising the public and others who want to install micro wind turbines whether it is appropriate.
There is, of course, a world of difference between giving advice and prescribing whether an individual householder can go ahead with what they perceive as a technology that would contribute some of the energy that they use. Given the fact that we are trying to minimise bureaucracy, it is slightly strange to say that we will proscribe someone's having a personal wind generator because some public body might assess that device as less efficient in that location than in others.
I am not suggesting proscribing; I am talking about allowing individual choice on the basis of the best possible advice, which is different.
So microgeneration should not be regulated. That goes to the heart of the legislative issue before the Parliament: should people have the option of erecting a wind-powered microgenerator or should that be subject to regulation? Perhaps you do not have a position on that, but it is the live legislative issue in the Parliament around microgeneration and has been for the past year. An understanding of where the Sustainable Development Commission Scotland stands on the issue would be helpful, as it dominates the legislative issues surrounding microgeneration.
I have not looked closely into the planning aspects, and I am not personally aware of huge numbers of applications for wind microgeneration being submitted in Scotland just now.
Yes, the issue dominates, but it is not right that it does so. In most urban settings, those technologies are not the right solutions—there are far better ones. There are lots of planning and regulatory issues to be discussed about local energy networks, which, in densely urban settings, give people a much better carbon payback as well as a financial payback. There are many ways to move on the policy debate, which it is urgent to pursue.
It is essential that we move things forward, but we must ensure that the drive to get reductions in carbon emissions does not disadvantage people. As Jennifer MacLeod said, folk are currently having to pay to be guinea pigs in an experiment because of the delay in getting the policy pushed forward. There is also the case that I talked about, in which people are having to dig into their pockets because of their housing association's decisions. Those folk should not have to fund that.
Our founding member is a housing association. I agree with the gist of what Dave Thompson says, but I would express it slightly differently. The reason for setting up an energy services company model to fund the initiatives that we are talking about is that that model can, and probably does, take a long-term view of funding a programme. If there is a high up-front cost for an interim solution over X months or whatever, that is taken into account in the 25-year planning horizon. The body that sorts out the peaks and troughs is the co-operatively owned energy services company, not the individual tenant. That is how things should work.
My worry is that such problems could discredit the whole renewable energy drive—people might want nothing to do with it.
What is the best approach to tackling poor energy efficiency standards in Scottish buildings? What would be your key priorities?
Are you talking about existing or new buildings?
Both.
We need to consider the whole energy mix of a building—how energy is provided, as well as its energy efficiency. All new homes are supposed to be zero carbon by 2016, and all other new buildings should be zero carbon by a few years after that. The current approach involves a gradual building up of the renewables component from 20 per cent or so to 100 per cent.
Should such retrofitting be mandatory?
The committee should consider the Danish precedent. In Denmark, when a local network has been started, new occupiers of buildings are expected to come into the network over time. The approach has worked well and is worth considering. However, I am talking about a careful and gradual approach, rather than one in which everything changes overnight.
Greater rationalisation of energy efficiency programmes is needed. For example, many households are targeted by both the central heating programme and the CERT approach, so there can be a fight over programmes that involve fitting similar measures. Billions of pounds are being spent every year, but we are focusing on the same sorts of houses and measures while failing to target those who are fuel poor. Consideration needs to be given to how we strip out duplication and poor targeting in order to ensure that we have an energy efficiency programme that encourages people to be mindful of the need to reduce carbon emissions while taking into account the fact that some people are incentivised by reductions in energy costs.
We need to consider the home owners who would have been tenants 20 or 30 years ago but who have been encouraged to become home owners. They are struggling; they cannot afford to put in energy-efficient systems and do not know where to go for advice. More is needed in that respect. I am talking about individuals; it is different for people in council housing estates where the council puts in the various energy efficiency measures.
I would echo all the comments that have been made already. It is worth looking at examples such as the plans for Comrie that are being funded through the climate challenge fund, and in which there is a coherent approach to the upgrade and energy performance of all the housing in the town. That is also being linked to information on behaviour change, how the system is working, transport, local food production and so on. A coherent approach in which we do everything together offers potential financial gains through economies of scale, and can also deliver greater carbon gain than if things are done piecemeal, as they have sometimes been done in the past.
I have a final point that links to the committee's next evidence session. In many cases, as well as public buildings being anchor stakeholders in local networks for retrofit to existing residential buildings, private firms and companies can be anchor energy customers. In some cases, they can also be private energy providers. This, too, goes back to taking a policy leadership role and extending people's mindsets so that they think about new ways of doing local energy networks. That debate should be had with the private industrial players.
We have talked a lot about people who own their homes and those who are in the social rented sector. What about the private rental sector? It is cause for concern.
Our early projects have a relatively small number of privately let homes. Of course, the incentives are different. The private landlord does not get anything out of putting money into the properties. We have been talking to the Energy Saving Trust about grant schemes that will enable local heat exchanges to be installed so that private tenants can participate in the local energy networks that we are installing in their areas. That kind of financial support is needed, otherwise there are mismatched incentives.
There is a point about creating a virtuous circle and ensuring that private landlords see virtue in making their properties energy efficient. That depends partly upon potential tenants being sufficiently aware to seek out energy-efficient properties and recognising them as a means of managing costs. Once that is cracked, you can start to tackle the private rented sector much more effectively.
We have our first instance of a private residents' association coming to us to seek help in funding an efficient solution for their homes collectively. That is the way forward.
I have a brief supplementary on extending energy performance certificates into the domestic sector. That is one of the ways in which we might be able to make progress. Each householder would know what is required. Have you any views about that? It could be one of the means by which everyone is alerted to what is expected for their property.
Yes, it is certainly part of our pitch to say that energy efficiency is one of the benefits for a home owner or a developer of homes. Those homes become more marketable because they have a better-performing EPC.
The information that is contained in EPCs can be used effectively to target the homes with low ratings first. There is a need for better co-ordination among all the bodies that hold the different bits of information—they should be able to use that information better.
I had a few questions to ask at this point, but I am mindful of the time, so I will let the committee move on.
This question stems from my earlier one. Is not it a worthwhile investment to bring in some sort of school-level qualification in domestic technology that kids must have? Their capacity to pick up complex forms of programming is far greater than that of adults. Once they know how to handle computers, programming TVs is a doddle. That would seem to be a potentially very useful but not very expensive investment that could prove to be of enormous value. Kids like solving that sort of problem: they can do in hours what might take their grandparents a week. It is like the old Groucho Marx line:
We work closely with eco-schools, which are dying to work together to help young people change their parents' mindsets.
The issue is partly about cultural change, which is largely being driven by greater awareness among kids, who influence their parents, who in turn influence their parents.
My next question is rather an ominous one. How much of our increase in demand is coming from new technology? It has been said that having a plasma-screen TV is the equivalent of having a four-wheel-drive car in the sitting room. Have we got ourselves into an impossible situation, in which we are trying to catch up with a consumer demand that is going to throttle us?
Let us consider the amount of energy that has been used in homes over the past 15 years. I now have a BlackBerry, which I did not have 15 years ago. I have a mobile phone, which I did not have 15 years ago. There is also a DVD player and a Sky box. Naturally, I do not leave things plugged in or on stand-by and all the rest of it, but there are gadgets that we all take for granted that we did not have 15 years ago.
I very much support those views. In addition to the information role of smart metering, Government has a role in choice editing—restricting the availability of high-energy technologies on the market. I do not want to discuss the specifics of different types of TV and so on, but any coherent approach to delivering the climate change targets that we are considering must help to drive the market along a much more energy-efficient path.
Should we consider more consumer information being made available at the point of sale, for example on energy use and on the recyclability of technologies? That would inform people about the implications when they are buying something. There is a traffic-light system for fridges and washing machines, but not for computers, laptops or plasma screens. Should the Government or the European Union consider that to ensure that consumers have the right information when they are buying new technology?
Yes—but that must be based on a framework in which the basic minimum standard is moving up all the time. There are roles in that respect at the Europe, UK and Scotland levels.
There is a further bit of joined-up thinking here, about broadband strategy and the next generation of very high bandwidth broadband. That means more technology, and the UK Government is trying to get us to catch up—we are way behind Korea, for example. There is a very good synergy here with the stuff that we do. If the streets are dug up to put in pipe networks, there is a very low marginal cost for putting in fibre at the same time. In Holland, for example, there are areas where people can use community-owned local fibre networks for telecommuting much more effectively. People here have dismissed telecommuting, because the quality of the experience is pretty low just now, but with a 100MW network, which is the same as in an office, or in this building, that provides a great deal of scope for reducing the carbon footprints that are left by physical commuting and travel.
I am afraid that we have run out of time in this evidence session, which has been extremely interesting. If any panel members have further points to make to us, they should feel free to submit them in writing. Thank you all for coming along.
Meeting suspended.
On resuming—
Our second panel of witnesses on energy efficiency focuses on the industrial sector. Time is fairly restricted, so I remind members to keep their questions brief and I ask the witnesses to keep their answers brief. We have about an hour for this session. I will have to draw it to a close after then.
I am the director for BT Scotland.
I am the director of Keppie Design, which is a firm of architects and town planners. I am also a member of the Scottish construction forum and a board member of Architecture and Design Scotland.
I am the press and government affairs manager for the Scottish Council for Development and Industry.
I am Scottish adviser to the Chemical Industry Association, which represents the chemical industries.
I am head of corporate relations at Diageo.
I am interested in energy prices. We have a clear picture that, compared with the rest of Europe, Britain has high electricity prices and low gas prices. From the point of view of industry, a good deal has been done on gas. Indeed, a better deal has been done on electricity. How do we provide more stable energy pricing regimes for industry, given the fluctuations that we have had in the markets?
Over the past year or two, we have noticed tremendous fluctuations in energy prices. The industry was already efficient, but the huge increases have provided further incentive to be more efficient. Planning is difficult when there are such fluctuations, but the solution lies in security of supply. The UK has become increasingly reliant on imported gas and has little storage for back-up. We had a problem last year when Longannet went offline at the same time as a nuclear station and the transmission system did not allow us to transfer energy across the country to balance that. Security of supply is the most fundamental point. In any commodity market, it helps to determine price.
Would the grid being able to work to and from Scotland be an important part of securing energy at price? If there were a capacity problem in Scotland, being able to import energy from England, France or elsewhere might be a short-term solution.
That would help, but there is an issue with where we get the energy from. We face a challenge in the UK, because a number of our older coal and nuclear plants are coming to the end of their lifespan. Where will we get energy from? Currently, the only solution seems to be gas—we have to examine the other solutions more closely, because diversity of supply is critical.
Our focus is on the energy efficiency of industry. Can you talk about that in relation to your area?
Yes. The chemical industry has a good track record of being particularly energy efficient. Many of the chemical companies have combined heat and power plants—it is about not just electricity but the need for steam. Looking forward, one of the issues is whether we can introduce more incentives to encourage those companies to invest in such facilities.
Can you see specific improvements being made to make better use of molecules?
Yes, there are many specific examples of products that are lighter and more energy efficient. Continued investment in research is important. It is great that the Scottish Government has set up Chemical Sciences Scotland to bring together, encourage and give advice to some of the smaller emerging companies—the spin-off organisations from universities and the small and medium-sized enterprises. Running a small company is very difficult for people because they have to be expert in so many different areas. Such companies provide a tangible benefit, because many of them are developing new products that will help to provide the solution. The chemical industry can provide the solution to many of the questions.
From Diageo's perspective, there is an irony in the fact that the volatility in the energy market was a key reason for our decision to invest in renewable energy. A key factor in our decision-making process and financial considerations was the need to be self-sufficient and therefore to invest in renewables to protect ourselves against future price and availability volatility. There were many reasons why we made the investment, but key ones were the lack of security of supply and pricing volatility.
I will pick up on the specific issues that relate to BT, some of which apply to the telecommunications industry in general. It is clear that there is a volatility issue. In terms of raw costs, our energy costs at the end of the financial year in 2008 were about £189 million globally. We project that cost to be £340 million by the end of the financial year 2009-10. That is a massive increase, about 89 per cent of which is within the UK and 11 per cent of which is abroad.
Energy pricing and its impact on the construction and property industries has focused minds not just on capital costs but on whole-life costs. That is a crucial factor. When looking at energy provision for buildings, the comparison between capital costs and whole-life costs can be significant.
The countries that have seen the most volatility in energy prices are the ones that have the least secure supplies. Ensuring security of supply and building long-term pricing into the arrangements are key. Scotland and the UK have very little in the way of gas storage, which has driven price volatility. In cold periods of the winter we use gas much faster than we can import it. Extending the storage facilities is key to getting rid of that volatility. The feedback from our members is that energy price volatility, with big peaks and troughs, is driving more and more people to look at alternative ways of generating and saving energy.
I want to follow up what Michael Alexander said about Diageo's decision. What more can we do to encourage businesses to consider the whole-life process, from the start of what they do to the end of it, and to make better use of their resources? The committee visited the Diageo plant at Cameron Brig to look at its proposals for using its waste product as its fuel. Can we, the Government and other agencies do more to encourage businesses to look at their processes and examine how they use energy and how they can use the by-products from their business more efficiently?
Undoubtedly. I was at the Carbon Trust's annual stakeholder meeting in Scotland last Friday. We got the corporate presentation, and one of the stats was that the Carbon Trust has worked with 70 per cent of FTSE 100 companies, which immediately raised the question, "Why have you not worked with the other 30 per cent?" The Carbon Trust has a good model, but, given its resources, it cannot possibly give everyone the intensive support and advice that they need.
Given what Niall Stuart said about the Carbon Trust, it is probably true to say that most large companies understand the issue of energy efficiency, either because they believe that climate change is important or because of money—either way, they are doing something about it. The challenge in Scotland is to hit the hundreds of thousands of small businesses, which is hard. If there is one organisation that can play a key role in mass marketing and continuing the process, it is the Government, and its agencies, in association with business organisations such as the SCDI. The Carbon Trust clearly cannot do all that work on its own.
Another more short-term issue, given the need for measures that require a reasonable amount of capital expenditure to be paid up-front, is that many businesses are currently having difficulty accessing money. In part, the answer to the question is to sort out the economic recession. That might not be quite the answer that the committee is looking for, but there is a lot in it. At the moment, it is difficult for businesses to access capital in a sensible way, so business survival is what many businesses are focusing on. As Niall Stuart said, we need to introduce incentives that encourage businesses to take a longer-term view at this difficult time.
As we mentioned when committee members visited our Cameron Bridge site, renewables obligation certificates and ensuring that financial investments are sound in the long term are big issues for us. The fact that heat is not currently eligible for ROCs is a big issue for us, because heat accounts for 90 per cent of the energy in distilleries. We produce about 20MW of thermal heat as opposed to 6MW of electricity. I know that the Government is looking into whether that issue can be addressed through climate change legislation or other routes. Ensuring the financial viability of big investment projects is a big issue for us.
Lewis Macdonald's question perhaps follows on from that point.
Yes, indeed. First, the UK Government is currently consulting on renewable heat. Are Diageo and industry in general aware of that? Will industry respond to that consultation?
As with many Government initiatives—I refer to initiatives not just of the Scottish Government but of the UK Government and European Commission—the spirit or intent is good, but that sometimes gets a little lost in all the paperwork and so on. Whether in a small or large business, businesspeople often find it difficult to cut through all that to find out which are the schemes of value. There is value in focusing on two or three incentive schemes and in ensuring that the various associations such as the SCDI and the Confederation of British Industry are well briefed to support their members. The networks of different organisations need to share information. That is a rather general answer to a specific question. A general plea on behalf of everyone who runs a business is that things need to be kept simple, transparent and easy to use.
Let me supplement that. An interesting example that I am involved with—this applies in both Scotland and the UK—that has not worked well but which might help to deal with the issues mentioned in Lewis Macdonald's question is the May day network that is run by Business in the Community and, in Scotland, by Scottish Business in the Community. The May day network is all about helping businesses to achieve the basics by providing them with a six-step ladder that they can use. Take-up has been fairly low, one reason for which is that making progress is hard unless, as well as talking about the theory, one can say in parallel, "If you want to do X, go and talk to so-and-so, and if you want to do Y, go and talk to such-and-such." That has been fairly weak, but it would not be difficult to fix. One thing that we can do collectively over the next year or so is get those linkages sorted so that there are channels through which businesses can easily obtain financial assistance and, critically, simple steps for doing things. Many people are clamouring for that. However, the subject is quite complex.
I will deal with Lewis Macdonald's questions in reverse order.
I would like to make a small point about the Carbon Trust and the Energy Saving Trust on behalf on Diageo—I can comment only on its behalf. We have worked closely with the Carbon Trust for several years; in fact, Diageo has managed to attain Carbon Trust standard certification in the past year—we were one of the first companies in Scotland to do so. More important, the Carbon Trust has helped us to introduce a culture change in the organisation. We now look to focus on cultural issues. It is all very well looking at the big numbers and big investment plans for bioenergy and other renewables, but the Carbon Trust has helped us a lot with our awareness of how to reduce our overall carbon footprint through encouraging a culture change in the organisation. The appointment of energy saving managers at some of our key sites, the raising at all our sites of employees' awareness of how to save energy, and the introduction of smart metering and other smaller elements that are not capital intensive have had a meaningful impact and have been important in the cultural move for all of us in Diageo Scotland towards having a mindset of always being aware. We have had a very good working relationship with the Carbon Trust, which has produced very good results.
I want to follow up on that point about culture change in particular. Again, we have heard that introducing smart meters in the domestic sector will make a big difference to people's awareness and culture and that carbon-saving benefits might result. How smartly does business in general understand its energy consumption at the moment? How important is technological change in improving matters? To what extent is the issue cultural, as Michael Alexander has described it?
Industry is very aware of its energy consumption. In the past 20 years, I have seen a dramatic improvement not only in monitoring the situation but in design. I refer to the previous debate on housing. A lot of money will be saved if manufacturing plants are designed to be energy efficient and a lot of heat recycling is built into them. The expression "What gets measured gets done" is true. As measurement technology has advanced and become cheaper, people have installed more meters and more software to monitor overall trends. The process starts with knowing what we are dealing with; something can then be done about it. There is now much more awareness of those issues, which is the biggest change that I have seen in the industry in the past 20 years. That has been driven by the relative rise in energy costs and by the more recent ups and downs in prices that we have talked about.
Traditionally, most organisations have viewed their energy costs as part of their fixed overheads. However, the volatility in prices in the past few years has made people start to realise that those costs are not fixed but variable. The better businesses are starting to consider smart metering and using real-time data. Tesco—which would have liked to be represented today, but it had other commitments—is rolling out eco-friendly stores. One way in which it is considering managing its energy use is through the use of smart metering and real-time data. Better businesses are thinking about the issues and using technology to change the behaviour and culture in their organisations.
I will share some of BT's experiences. We have made a lot of progress on energy use and, consequentially, carbon reduction. However, we could not have done that without understanding where the costs are. At the top level, our costs break down into about five areas, with detail below them. There are the networks and the big data centres, but there is also simply our property estate and, of course, travel. An organisation can do a lot on travel simply by using technology differently. We do that internally in spades, but there is a real opportunity in Scotland to change travel behaviour. As a consequence of that work, we have achieved two things. First, we have saved money and, secondly, people travel less and therefore make more productive use of their time. The changes have reduced our carbon impact and our impact on particular roads. We use public transport more heavily, too. In the long term, we envisage an internal push, which will come from the top, to continue to drive down the amount of travel, particularly road use.
I have a small point about understanding overall energy use. Like the Government and others, we have set targets for reducing our carbon emissions. We aim to reduce our absolute carbon emissions by 50 per cent by 2015. That is during a period of expansion, so the target is challenging. I appreciate that Diageo is a large organisation and therefore has sufficient resources to measure and understand the process. Our corporate citizenship report states that we will try to meet the target. Once everybody understands that the company will be measured against the target, that will set our agenda and drive everybody to understand and meet the target. That is just a small point about targets—they help to engender culture change.
I am informed that our interrogatees have not seen the diagram that has been provided to the committee showing energy flows in Scotland. It shows that the equivalent of 47TWh goes to transport, which is one third of our total energy use. Of that, roughly 80 per cent goes into motor transport, for lorries and the like. The figure is an increase by a factor of four from the 1960s. We are currently faced with the collapse of much of the global car industry. Is it not an advantage that, since the demise of the Hillman Imp, we have not had a car industry in Scotland? I speak as a convinced non-motorist who has not driven one of the things since being frightened out of my life on the A5 in 1976. That has not had any ill effects on my career, although that may be because I have lived in parts of Europe where the level of public transport utilisation is two to three times that in Scotland. Is that not one area that can, in the present economic circumstances, be squeezed?
We are all relieved that Chris Harvie does not drive.
I am a keen user of public transport. I was up in Inverness a couple of days ago, where I saw Rob Gibson. I avoided travelling there by car and—to return to the economics—it is significant that I did seven hours' productive work when travelling there and back by train. I would not have been able to do that work in a car, in which the round trip might have taken six hours.
I will consider the macro side of the point that Christopher Harvie made. We import and export many materials. A key initiative is the development of the Grangemouth freight hub using the excellent port there to create integrated transport. The area has rail links and we need to strengthen the road links to the facility so that more loads can be taken off the roads and more freight can be brought into Grangemouth, which serves the main part of Scotland. That is one way to improve the situation. Anyone who drives down the M74 and the M6 at any time will see that many heavy goods vehicles use that corridor. We could take some of that freight off the roads and put it on rail or into container traffic. Integrated transport is an issue not only for individuals but for business.
We can move more journeys on to public transport and we can work with companies on how they manage their fleets and how their employees travel to and from work. The high fuel price has woken people up to the issue and several of our member organisations are examining transport. However, when Diageo produces X litres of whisky wherever it is made, it needs to make the journeys to get that to the market to generate sales and profits. The issue is moving more of that freight on to the rail network and off the roads.
Transport miles in the construction industry are probably a major contributor to the figure that Christopher Harvie cited. One driving force for changing that is encouraging clients to establish methods of rating their construction projects that measure the amount of energy that is used in the construction process.
Niall Stuart and Ken Richardson mentioned moving from road to rail. It will not come as a surprise to anyone in the committee that we have found it a bit of a struggle to do that. We had an ambitious plan to move up to 2 million miles' worth of lorry journeys from road to rail but, as a result of the difficulties that we encountered, the plans have been put back a little bit in our timetable. However, we will continue to move towards that goal, which is our ultimate aspiration, particularly because some of our key sites are located right next to rail lines.
What is causing the difficulty? What are the main barriers?
There are a number of difficulties, such as congestion in the network. The committee will be aware that Network Rail has its own priorities in terms of passenger safety and so on. We have been working with Network Rail for a long time in our efforts to move some of our freight on to rail, but we have not been able to do so yet.
In Austria, rail accounts for 38 per cent of freight miles, which is a significant improvement that is mirrored elsewhere. If the British institutions are not capable of providing that improvement here, it might be worth considering whether the British railway system might be better managed from Europe, as part of an arterial strategy. It is unfortunate, from the point of view of freight transport, that the enormous amount of investment that is needed in the network has not been made.
I would note that we manage the connection between Scotland and England well. We are a big user of Grangemouth port and use the rail hub there as well. We also use the Eurocentral freight terminal. Overall, we move a lot of our material out of Scotland by rail. However, there is a struggle to move material by rail within Scotland.
Would your organisations be interested in doing an energy audit of the towns such as Inverness that have, alas, opted for a supermarket-retailing strategy and other towns, such as my own native Melrose, that have retained a local SME-generated retail system? The impression that I get is that, despite the promises of big supermarket businesses to develop more eco-friendly stores, the total impact of the supermarket model is extremely great in terms of freight transportation and the use of the motor car. Would it not be wise to see how a particular area operates at all levels and to compare a small-is-beautiful model, which uses street markets and so on, with a supermarket model? That would give us a rational basis for our thinking.
I will deal with your first point first. The problem with moving from road to rail has more to do with capacity and investment than with the management of the system. Network Rail generates revenue from every train that runs on the network. It wants more traffic, but the problem is the capacity. Who is prepared to invest to generate that extra capacity?
The City of Edinburgh Council aspires to be carbon neutral by 2050 and I have heard that some small towns in Scotland have set themselves the same target. That is a good aspiration, but to achieve it we need to consider the matter holistically. First, there must be the capability to achieve the target. When some of those aspirations were first expressed, no thought had been put into how to measure or address the problem.
I invited an SCDI member from Tesco to come to the meeting, but they could not make it because they had a prior commitment. However, they said that they would supply evidence in writing.
Thank you. That would be helpful.
This is more comment than question—if anyone wants to comment on the comment, feel free to do so. The use of local timber for the SNH building is great, and it is good to source quarry materials and other stuff locally. However, that might not be possible for developments in a national park, where people certainly would not be allowed to open a new quarry and existing quarries sometimes have to close down. Stuff sometimes has to be transported great distances.
May I comment on the comment? Society sets out to do things with good spirit and intent and for the right reasons, but those things sometimes get in the way of other things. What you said about national parks is an example of that. Similarly, we might ensure efficient use of public money by considering global procurement, but such an approach can knock out local suppliers and lead to higher energy costs. We have to find a balance. You would be surprised if I did not say that industry must also think sensibly about whether European environmental legislation is achieving the spirit that was intended. That takes me back to the work of Russel Griggs and others on better regulation in this country. Sometimes, what appears to be the solution in one area can create a problem in another area, as your comment illustrated.
There are many difficult trade-offs to be made between local and national environmental benefits and targets. The environmental movement is all about reducing CO2 emissions, but local environmental groups often object to wind farms. We must make difficult decisions about the impact of local developments and their potential contribution to national targets.
I will also make a brief comment on Dave Thompson's comment. The construction industry is encouraged not to open up new quarries but to use recycled materials. That is happening quite a lot and is being encouraged by, for example, landfill taxes, which discourage the dumping of material and encourage the reusing of material.
Niall Stuart has to leave because he has a flight to catch. I thank him very much for his evidence. He should feel free to give us any additional written evidence.
Could I ask a follow-up question?
I will come to you at the end, Nigel, but I need to give the committee members the first opportunity to ask questions. We are running short of time, but I will come back to you if I can.
We have talked about the energy efficiency of buildings and about the need to roll that out throughout the industry and to maximise the use of new technologies. I have a two-part question on skills. In previous evidence, we heard a lot about skills gaps, and Andrew Pinkerton talked about the construction industry, retrofitting and so on. Do we have the necessary skills at the moment? Are we spending enough on research and development and are we well placed to be able to implement the new technologies?
My immediate reaction is no on both counts. I do not think that we have sufficient skills to take advantage of the retrofit opportunity. There are different requirements in relation to what can be done and how we apply some of the technologies. Perhaps we have focused on what are often referred to as the biblical trades in the construction industry. Although the basic skills of joinery, plumbing and so on are all-important, more work needs to be done on specialisation of skills, and perhaps on some crossover between them so that we have operatives with the right mix of skills to be involved.
I support that view. In our experience, there is a distinct skills shortage in electrical and mechanical engineering. Most of the 20 or so jobs that we are creating at our new distillery in Roseisle and at the Cameron Bridge bioenergy facility are focused on electrical and mechanical engineering. From our perspective, there is a skills shortage in that area.
Andrew Pinkerton made an interesting comment about the computer industry. I look at the issue more from the point of view of skills utilisation. The skills and the knowledge may exist somewhere in our industry, but it is necessary to apply them.
I have another comment on skills. The development of more clearly focused modern apprenticeships has been encouraged. We must ensure that we not only continue that drive but secure the modern apprenticeships that have already been set up. Many businesses are experiencing difficult economic times. Such efforts are an investment for the future.
Michael Alexander said that what gets measured gets done. Whether one attributes that quote to Peter Drucker or to Jim Mather depends on where one sits. We have heard about the robust targets that Diageo has set, and Brendan Dick mentioned the robust targets that BT has set. Are such voluntary targets the exception or the rule, or do they fall somewhere in between?
Every company that I am aware of is very much into target setting. Sometimes, they go a little bit overboard. It is important that the people who work in an organisation understand what the target is about, what it is trying to deliver and what their part is in that process. The trick for any company is to ensure that that happens, so that people understand what will make a difference. As Brendan Dick said, people will also understand what measures they can take from their work environment into their home environment.
We talked previously about the energy efficiency of supermarkets. It occurs to me that supermarkets have large buildings that they are trying to heat and quite a lot of products that they are trying to keep cool. Of course, fridge systems generate huge amounts of heat which, by and large, we throw out into the atmosphere, because that is how the system was designed. The heat exchanger is not normally put inside the building, because the fan that is attached to it generates too much noise. The big chemical industry has long since worked out how to handle that heat flow. I imagine that supermarkets are gradually getting there—I do not mean to be disparaging to Tesco or others. Is anybody out there in a position to advise relatively small or medium-sized businesses that have such equipment sitting on their building? Can anyone help them understand how to work through the relatively straightforward modern technology that is involved in handling those heat flows?
There are a number of support organisations, some of which are publicly funded. In our sector, organisations such as the Scottish manufacturing advisory service are working in that area. I am not an expert in what is going on, but some of our member companies have told me that they have benefited from such support. Sometimes, the benefit is in working with a group of other companies and sharing best practice and ideas. There is huge benefit in seeing how someone else has tackled a similar challenge. There are certainly a number of support organisations in the manufacturing industry, which should be encouraged.
We heard earlier about the difficulties that local energy market networks have in spreading the cost among relatively small numbers of households and we heard that costs could be absorbed and spread more easily if large public sector or private sector operators shared the burden. Can we do more to incentivise businesses to get involved in local energy networks as an anchor business or to get trading estates or town centre managers to encourage the private sector to get involved?
Large private sector organisations are generally open to any good ideas. There is no one solution. The key thing, which I know from our own experience of looking at renewables in general—although you are talking about local networks—is to ensure that the commercial model is right. Broadly speaking, I think that there is a willingness to engage if the model makes sense.
Sometimes, there are issues to do with capital funding, because an infrastructure must be put in place to enable such schemes to happen. At the moment, many organisations are understandably focused on the bottom line and not on things like that. I was involved with an organisation that was considering a community heating scheme—this was a number of years ago, so it is perhaps not so relevant today—but there were a number of barriers caused by the criteria that we had to meet. We were not satisfied that we would get value for the effort that we would have to put in, which goes back to the point that Brendan Dick made.
You have raised concerns about targets being set from outside. What are your views on how helpful energy performance certificates for buildings would be in reducing energy demand in non-domestic buildings? We asked the previous panel the same question, so it will be interesting to see what you have to say, as you are the prime focus.
In the industry in which I work, most of the plant is outdoors. As has been mentioned, a lot of work has gone on in relation to energy interchange and efficiency within those units. Many other manufacturing companies have inherited relatively old buildings and old spaces, which are often difficult to convert to high levels of energy efficiency. The best way of ensuring such efficiency is to start at the design stage, rather than going back and doing corrective engineering.
In the commercial property sector, the economics are such that new commercial developments just cannot happen. That is causing many organisations to review their existing commercial properties. The requirement to produce energy performance certificates is, in some respects, an incentive for them to say, "If we can improve our energy performance in this building, can we perhaps sweat this asset a bit more and get a higher rental return for it?" It perhaps prompts them to ask themselves what they could do to improve the energy performance rating in a building, and whether they can introduce energy-saving measures, building management systems and so on.
I agree with the point that has been made about new and old. With regard to energy efficiency and environmental performance, building a new distillery is a lot easier than converting an existing distillery. Also, it is much easier to convert a big site that is a high energy user, as the costs can be measured and the impact can be understood; that is something that we can invest in. However, we have 25 small distilleries, many of which are in remote and rural locations, and the capital investment that would be required to make those more energy efficient—which in our case would mean investment in biomass and conversion of coal products into renewable energy—is difficult to make stack up financially. We are struggling to find additional support and R and D support to try to make those smaller sites more energy efficient, when there is not such a big bang for the buck in terms of investment.
I thank the panel members for their evidence. If you wish to give us any additional evidence in writing, feel free to do so.
Meeting suspended.
On resuming—
We welcome our third and final panel this morning. I am particularly looking forward to this session because, as many of you will know, Mark Roberts was the senior assistant clerk to the Education Committee when I was the convener of that committee. It is nice to see you again, on the other side of the table. I hope that you will enjoy the session.
Thanks, convener. We welcome the opportunity to contribute to the committee's inquiry, which is very helpful to us. As you know, we published the Audit Scotland report in December and the Auditor General provided a briefing to the Public Audit Committee at that time. This morning, the Public Audit Committee considered a response from the Government on some of the issues that it had raised. Mark Roberts and I have just come from that committee. Hot off the press is the news that the Public Audit Committee is going to refer the Audit Scotland report and the Government's response to this committee. So, although we are happy to be here today, we will also be happy to come back another time, once you have been formally handed that work, if you want to go over the report again.
Thank you. I am sure that the committee will look forward to the referral from the Public Audit Committee. Marilyn Livingstone will start the questioning, as she has to leave at 12.30 for another meeting that she cannot get out of.
I have been asking other witnesses about building standards and the best approach to targeting poor energy efficiency standards. In talking about data collection, you say that in some areas there is not appropriate information. How do we go about improving that and tackling some of the complexities of the public sector building estate? It is difficult to know what improvements we need to make if we do not know the current figures. How do we get through that quagmire of complexity in the public sector building estate?
One of the big challenges is, as the previous panel discussed, the age and nature of the public sector estate, which is very large and complex. One of the problems that we encountered in the study was the fact that there is limited use of accurate metering technology that would enable us to understand energy consumption.
You mentioned new build. Are the steps that we have taken on new build enough? Are the targets sufficient?
We did not look in detail at the building standards requirements, but they are a step in the right direction. We are not, on the basis of the field work that we carried out, in a position to state whether or not those steps are sufficient to meet the long-term targets.
Can you break down the 4.8 per cent reduction in energy consumption in public buildings? My understanding is that 90 per cent of councils have an energy management team, as do 59 per cent of national health service bodies and 36 per cent of central Government organisations. Is there a correlation between the parts of the public sector that had energy management teams in place and the parts of the public sector that have contributed to the 4.8 per cent reduction? Do you have that level of detail?
Councils and the various sectors of the NHS contributed most to the reduction in consumption. There was a marginal increase in consumption in the central Government sector during the three years that we considered. The reasons for that are a matter for speculation, but councils and the NHS are much larger consumers of energy, and we might expect them to concentrate more on reducing their costs. On the question of a correlation between the presence or otherwise of an energy manager and reductions in consumption, I would say that where there are energy managers in place, there tend to be greater reductions in consumption.
Central Government organisations had the lowest figure for energy management teams—36 per cent—and its consumption went up.
Yes.
Councils had the higher figure of 90 per cent, and 59 per cent of NHS organisations had an energy management team. Did councils contribute more to reductions compared with the NHS, or do you not have those data?
Can I come back to you on that? I will need to check the background information.
Sure. Thank you.
One of the recommendations that you make for the Scottish Government is that more work should be done on monitoring, and that "robust monitoring arrangements" should be in place. I was struck by the comments in your report that there are no formal monitoring arrangements. I had previously assumed that such monitoring would have been carried out, perhaps not universally but by at least some public sector bodies. Is it simply a case of joining up reporting systems that currently exist, or are there some really large gaps in the monitoring and reporting that the Scottish Government is currently doing?
It varies between sectors. For example, within the national health service, Health Facilities Scotland has provided a co-ordinating point for quite a lot of monitoring work. HFS produces an annual report on the NHS's overall performance over the course of the year. We understand that the Government is looking to apply that approach in other sectors.
That is potentially some way off, however, which is not really in line with the urgency of your recommendations, I presume. What sort of timeframe do you attach to the recommendations in order that they might make a difference to energy efficiency in the public sector?
We have not attached a timeframe to them. Audit Scotland is one part of the accountability process. In bringing our reports to Parliament, we hope that Parliament will take the recommendations on board, that it will respond positively to them and that it will ask the Government to implement them.
The current timetable that has been described to the committee is that the energy efficiency action plan will appear 12 months after completion of the bill process. From what you have said, it seems that you could be examining the efficiency in implementation of your recommendations at the same time as, or even before, the publication of the energy efficiency action plan. If you agree that that is the timetable as you understand it, will the Government need to act earlier than 12 months after the completion of the bill process if your 18-month follow-up is to be meaningful?
The Government is taking action. Sir John Elvidge's response to the Public Audit Committee, which Angela Cullen mentioned, explained the steps that have been taken as part of the leading by example programme, which is explicitly designed to promote energy efficiency and wider improved environmental performance across the public sector. Steps are being taken now—it is not all about waiting for the energy efficiency action plan.
That relates to the leadership recommendation: I support that and I recognise the point that you make. The monitoring recommendation is, however, different to the leadership one, so I am asking whether monitoring needs to be acted on prior to 12 months after completion of the bill in order to make a meaningful difference that you can then review in line with your normal procedure.
To be perfectly honest, I do not know the answer to that question. We can come back to you in writing, if we have a view.
Obviously one of the interesting things in your report is that it seeks to specify the character of the public sector estate. There are 18,000 council buildings, 1,000 NHS buildings and, if Scottish Water is excluded, only 650 central Government buildings, so the potential challenge that faces central Government compared to that which is facing local authorities should be manageable. In that respect, I want to follow up the same point. I am truly puzzled as to why you recommend establishing "robust modelling arrangements" and reporting publicly against national and international targets, but suggest to public bodies no timetable for that to happen—not to central or local government, or to the NHS. I am mindful that we are lecturing everyone else about targets, so it is surprising that you have not set a timetable for either monitoring or reporting. In the preparation of your report, did you consider and then reject setting a timetable for monitoring and reporting on improvements in energy efficiency in the public estate?
We can probably answer the final part of the question first. We did not discuss or consider timetables. As an audit organisation, we do not normally set timescales for public bodies to implement our recommendations. We expect public bodies to react to them through the audit process. We review whether public bodies are considering the reports in their governance arrangements and audit committees. They feed back to us at the centre and we keep an eye on what is being done and how they are responding. They might each have their own action plan for responding to our recommendations and their own timetables for implementation because they start from different points.
So, in principle, if a public body indicated that it was going to establish robust monitoring arrangements and report publicly, but was not prepared to do that until, say, 2016, that would not be a problem to you.
We would certainly report that when we looked at it again. We would expect something to have started to happen by that time. The reason why we have a two-year delay in going back is to allow public bodies time to respond, to start to pull together their own action plans and to have made a measurable impact.
The Transport, Infrastructure and Climate Change Committee yesterday heard evidence from the sustainable Scotland network on the Climate Change (Scotland) Bill that local and central Government probably have a fairly small footprint in terms of emissions of greenhouse gases. You also make the point that
As I mentioned to Marilyn Livingstone, there is a big problem with data accuracy. The quality of the data is significantly better on energy consumption within buildings than it is on transport in the public sector. That is a major area in which the public sector will have to do more work to improve the quality of its data.
If we are going to be influencing people and sharing best practice and so on, one of your key demands would be that we should have much more accurate data.
Yes.
Yes.
Carrying on from a question I asked the preceding panel, I wonder whether one could do a relatively limited but holistic case study of two communities, one of which had opted for what seems to be the current norm for retailing in Scotland—the large, out-of-town supermarket, accessed by heavy lorries, and with customers arriving by car—and what seems to me, from my experience in Europe, to be the much more satisfactory and environmentally tolerable model of encouraging smaller units and in-town street markets and so on. Such a study, taken over time, would consider the environmental, social and energy impacts of the two models.
I am sure that such a study is perfectly feasible, but it would be beyond the remit of Audit Scotland to take that kind of overall community approach. It encroaches on the private sector, and we can only consider public sector bodies, as we have done in this study. However, I am sure that other organisations would be perfectly capable of undertaking that sort of audit.
I want to ask a similar question to one I asked the first panel. You have described two objectives that ought to be achieved here, in the recommendations both to the Government and to the public sector, which are improved energy efficiency and reduced CO2 emissions.
I will answer your questions in order. We did not look at renewable energy, because it was not within the scope of the study. We did consider it right at the start, but once we started looking at it, we decided to take it out and return to it. We have it at the back of our minds, so we will probably return to it later to see what the public sector is doing in that area.
That is reassuring. So, that is already within the contractual arrangements.
The contract is being negotiated at the moment. We do not know the detail of that central contract, but the ethos of strategic procurement and central procurement is that it should meet the needs of local bodies.
Will Audit Scotland consider that, to ensure that it has happened once the contractual arrangements are in place?
We will not have looked at it in the strategic procurement study, because the timings are not right—the central contract for electricity is currently being negotiated.
The implications could be looked at in a follow-up study which, as Angela Cullen said, we will consider in a couple of years.
Again, that is very helpful.
Obviously, we have focused specifically on mechanisms for reducing energy consumption. I am sure that public bodies will, in producing their overall energy plans and strategies, take a more holistic view and that they will incorporate the renewables issues that Lewis Macdonald mentioned.
I have a couple of final questions on the central energy efficiency fund and the other funding that comes from public bodies' budgets into energy efficiency. I understand from your report that public bodies have spent something like £30 million over three years on energy efficiency measures, yet they have spent somewhere in the region of £750 million on energy costs. Is £30 million, against a budget of £750 million, an adequate amount to invest in energy efficiency, from an audit point of view—or a best-value point of view?
We highlight the issue in our report. Sir John Elvidge acknowledged in his response to the Public Audit Committee that the funding for improving energy efficiency is competing with lots of other priorities in the public sector. It is difficult for us to say whether it is adequate or not. What we are looking for is evidence that the bodies are reducing their energy consumption and their emissions. They have been doing that, and we hope that they will continue to do so.
The final recommendation is to
In the current financial climate, those points are absolutely valid. Public bodies will always try to procure in ways that deliver best value or value for money. However, we are aware that the Government is preparing guidance on sustainable procurement, which it plans to publish later this year. That guidance will take all the issues into account and set out new guidelines for procurement.
Convener, if I may return to Gavin Brown's question, the reduction throughout the NHS was 7 per cent for the three years that we examined, and in the council sector it was about half that. There was a marginal increase in the central Government sector.
Thank you.
That concludes our questions. Thank you for coming along this morning. We look forward to a future session on the report that the Public Audit Committee is to refer to us.
Meeting suspended.
On resuming—