Meeting of the Parliament

Meeting date: Wednesday, December 20, 2017

Official Report 926KB pdf

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Energy Strategy

The next item of business is a statement by Paul Wheelhouse on the publication of the Scottish energy strategy. The minister will take questions at the end of his statement, so there should be no interventions or interruptions.

14:41  

Today’s publication of “Scottish Energy Strategy: The Future of Energy in Scotland” marks a significant advance in Scottish Government energy policy and, indeed, energy policy for the Parliament. It follows a major process of consultation, which covered not only the draft energy strategy but detailed matters relating to onshore wind, Scotland’s energy efficiency programme, the development of local heat and energy efficiency strategies and district heat regulation.

The strategy that we are publishing today is fully in line with our draft climate change plan. It also supports our programme for government commitments and our ambitions for sustainable growth. It sends a series of clear messages about our determination to decarbonise; our commitment to support the innovation and evolution of our energy system; and our focus on inclusion and economic benefit and the development of supply chain opportunities. We also make plain to the wider world that Scotland is an open, modern and excellent location for energy investment and collaboration. The strategy is accompanied by the “Onshore Wind Policy Statement”, which confirms the value of onshore wind to Scotland’s energy system and our economy and communities.

This year, 2017, has been an important year for the energy sector. We have seen dramatic reductions in the cost of offshore wind and more success for Scottish projects in securing long-term contracts at auction. Those developments and others in sectors such as floating wind energy and wave and tidal power generation provide a huge opportunity for the Scottish supply chain. Our programme for government, which was announced by the First Minister, contained new commitments on electric and other low-emission vehicles and our intention to support up to £60 million of new innovation funding under the low-carbon innovation fund, setting Scotland apart as a country at the vanguard of the global move to low-carbon energy systems.

Scotland is also leading the way in promoting community and locally owned renewable energy. We are well ahead of the rest of the UK on that approach, which gives people a genuine stake in the nature and operation of their energy systems. I can announce today that the latest figures from the Energy Saving Trust show that an estimated 666MW of community and locally owned renewable capacity is now operating in Scotland, which is an increase of 12 per cent from last year’s figure. I firmly believe that people want more of such opportunities and we will continue to work with industry and communities to make that a reality.

Our local heat and energy efficiency strategies will set out a long-term prospectus for investment in new energy efficiency, district heating and other heat decarbonisation programmes. Indeed, a second consultation is now under way on the detail of those proposals.

The energy strategy includes our vision for 2050 of a flourishing competitive energy sector delivering secure, affordable and clean energy for Scotland’s households, communities and businesses.? Scotland’s social and economic well-being and the sustainable productivity and competitiveness of our economy depend on secure, affordable and reliable energy supplies.

We can build on Scotland’s existing industrial strengths, including harnessing the capabilities of our world-class oil and gas sector, and leading industrial clusters such as Grangemouth, as well as the growing strength that we have in all areas of renewable energy. Scotland’s businesses are also well placed to capture the economic benefits of developing and pioneering new approaches. Smarter ways to generate and store renewable energy, and to monitor energy use, can open up fresh opportunities for consumers, with applications and technologies that can reduce both carbon emissions and energy bills.

The move to electric and ultra-low-emission vehicles will create both opportunities and challenges for our electricity and transport systems. A co-ordinated approach involving all stakeholders will help us to understand and tackle those opportunities and challenges in the best way possible. Scotland’s energy efficiency programme places a renewed emphasis on reducing the energy consumption of our buildings and decarbonising their heat. Our earlier designation of energy efficiency as a national infrastructure priority underlines the economic benefits of that kind of investment.

We are determined to make our energy system as inclusive as possible, protecting and informing, but also involving and empowering Scotland’s consumers. However, for far too many households, energy is still unaffordable and the market is failing many Scottish consumers. Many of those fuel-poor households are part of a significant group of consumers who do not switch suppliers and are therefore on some of the most expensive energy tariffs. Although recent moves by the United Kingdom Government to cap tariffs for certain consumers may help to reduce bills, that may be insufficient in isolation, and such tariff reductions must form part of wider efforts to ensure a fairer market for all.

That is why the First Minister announced in October the ambition to establish a new energy company. The aim is that the company will support economic development and contribute to tackling fuel poverty, as well as being owned by the people of Scotland and run on a not-for-profit basis. It is important to seek views and expertise as we further develop that proposal.

Early feedback on the strategy consultation has been constructive, and we are grateful for that input. In one of those responses, the University of Edinburgh’s department for social responsibility and sustainability said that it would

“welcome exploration of a place for a government-owned energy company to act on a non-profit basis, addressing market failures to assist in lessening instances of fuel poverty.”

Following the announcement of our aim in October, Dermot Nolan, the chief executive of the Office of Gas and Electricity Markets, was widely quoted as saying that Ofgem would

“welcome any form of potential new entry”

into the energy market. Today, we commit to a formal process of public consultation in the later part of 2018.

Scotland has always set a high bar when it comes to our energy potential and goals, and we are internationally recognised for the strength of our commitment to the development of renewable energy, particularly in electricity. I can confirm today that we are building on that progress by adopting two new and ambitious targets for 2030. The first target is for the equivalent of 50 per cent of Scotland’s total energy consumption for heat, transport and electricity to be supplied from renewable sources. That demonstrates our commitment to a low-carbon energy system and to underpinning the continued successful growth of the renewable energy sector in Scotland. The second target is for an increase of 30 per cent in the productivity of our energy use across the Scottish economy. That means delivering more economic output for each unit of energy that is consumed across the economy.

Alongside those important targets, we have developed six new strategic priorities, which I will summarise briefly. First, we will make greater efforts than ever to protect consumers from excessive costs while helping them to take advantage of new opportunities arising from energy. Secondly, we will continue to prioritise energy efficiency, supporting and improving the efficient use of energy in Scotland’s homes, buildings, industrial processes and manufacturing. Thirdly, we will continue to champion Scotland’s renewable energy potential, with an ever greater focus on creating new jobs and supply chain opportunities. Fourthly, we will ensure that Scotland’s homes and businesses can continue to depend on secure, resilient and flexible energy supplies. Fifthly, we will empower our communities by supporting innovative and integrated local energy systems and networks to drive both local community and economic regeneration. Finally, we will continue to support investment and innovation across our oil and gas sector, including in exploration, innovation, subsea engineering, decommissioning and carbon capture, utilisation and storage.

The strategy includes a range of actions to deliver our goals. We have committed up to £20 million, through an energy investment fund, to support and stimulate renewable and low-carbon energy investments in 2018-19. That will build on the success of the renewable energy investment fund. Expansion of the funding support to include low-carbon technologies alongside renewables will ensure that future investment reflects the wider systems approach and local energy ambitions that are being encouraged in the strategy.

Today, we are also publishing our onshore wind policy statement. We expect onshore wind to play a growing and invaluable role in our transition to a low-carbon future. The support and investment frameworks for onshore wind have fundamentally changed, just as the technology is also changing, with moves towards larger, more efficient turbines that have made onshore wind highly cost effective.

We are determined to secure a route to market for new developments through policy changes at a UK level and through actions of our own. Our planning system already makes positive and practical provision for onshore wind, protecting our landscapes and ensuring that development goes ahead only in the right places. That will remain the case, which will ensure that onshore wind can continue to power Scotland’s low-carbon future while involving, regenerating and benefiting local communities.

Today’s publications mark the next stage of a process rather than a full stop. We are determined to increase public and business engagement on our energy future. People are much more aware, interested and informed about energy issues—not just policy, but the ways in which technological and other changes can give households, businesses and communities more options and control. As we move ahead, we will need to take all of society with us.

Together with the final climate change plan and Scotland’s energy efficiency programme, we will develop a new approach, drawing on experts from a range of backgrounds. We will monitor the strategy annually, working closely with the Scottish energy advisory board and its industry leadership groups. We expect to publish the first annual statement in 2019.

Scotland has world-class skills, expertise and knowledge from the North Sea oil and gas industry to our growing renewable energy sector and from academic institutions to small start-ups. The strategy recognises and builds on our past, our achievements to date and Scotland’s capacity for innovation. It confirms the vital role of energy efficiency and our renewables potential as well as our desire to create new, local energy systems and develop the Scottish supply chain to deliver a sustainable energy future. It places consumers and their interests more firmly than ever at the heart of everything that we do. I commend Scotland’s energy strategy to the Parliament.

The minister will now take questions on the issues that have been raised in his statement. I will allow around 20 minutes for that.

I note my entry in the register of members’ interests, particularly in relation to businesses that are involved in renewable energy.

The publication of the strategy is long overdue and, disappointingly, the delay does not appear to have resulted in more substance. We welcome the overarching goals for 2050 and the support for and recognition of Scotland’s island wind and the UK Government’s role in the contracts for difference process.

However, the remainder of the strategy provides no detail about what should be achieved, and how that should be done, between now and 2050. The only indication of further detail is the route map for Scotland’s energy efficiency programme, which will not appear until May 2018. In six pages of strategic priorities, financial commitments are given for only two Scottish Government actions. The remainder consists of promises of further engagement and development of aims, and mere words of support.

Once again, we have a Government strategy that is long on rhetoric and short on detail and which looks like a draft. When will we see details of targets and actions that are to be achieved before 2050?

I will point out a few things to Mr Burnett. First, the strategy is not at all delayed. We published the draft strategy in January for consultation until the end of May. We committed to publish the strategy by the end of this year and we have delivered on our commitment to do so, so it is wrong for Mr Burnett to claim that it has been delayed. I can understand the industry’s excitement about the strategy being published, as it strongly supports the direction of travel in which the Scottish Government is going, and the industry is obviously eager to see the final document.

I challenge what Mr Burnett said about the detail, in that the process has involved considerable consultation with the Scottish energy advisory board and the industry, and they are strongly supportive of the list of actions that we have published. The strategy is to be seen in concert with the climate change plan, which will be published early in the new year, and it has been developed using the TIMES model. It is a very thorough document, which has been warmly welcomed by the industry.

We understand that the UK Government is looking very closely at taking a similar line to the Scottish Government’s whole-system approach. As with many other decisions that we have taken ahead of UK ministers, such as on underground coal gasification or—in due course, I believe—on fracking, Mr Burnett will find that the UK Government has plans to take a similar approach to the Scottish Government in this respect.

I thank the minister for providing an advance copy of his statement. There is much to welcome in the energy strategy but, as ever, the Government will be judged on its actions.

The minister talked about the renewable sector’s potential and having an even greater focus on creating new jobs and supply chain opportunities, and we agree. It is fair to say that, so far, the major investment in renewables has not led to a significant number of jobs or to the retention of supply chain opportunities in Scotland. Mr Wheelhouse will be well aware of the recent problems with Burntisland Fabrications Ltd, and I welcome the efforts of the workforce, the trade unions and, indeed, the Scottish Government in ensuring the future of the yards.

However, it is clearly the case that the overwhelming majority of the investment in the Beatrice project, to take one example, has gone overseas. Less than 4 per cent of the value of that £6 billion of development has been retained in Scottish manufacturing. It is surely not beyond us to retain a greater proportion of work and jobs at home. There is scant detail in the energy strategy that tells us how the Scottish Government will do that, so can the minister tell us what he will do to ensure that opportunities turn into reality?

I thank Jackie Baillie for the constructive tone of her question. I reiterate the point that I made in my statement: we propose to monitor delivery of the strategy. I fully accept that, now that we have it, we must deliver on it. We will report annually on it, so Ms Baillie will be able to judge us on our progress, and I am sure that she will do that in her usual robust style. I look forward to engaging with her on that.

Jackie Baillie is right to identify that there are some examples of projects that have a low Scottish content and even a low UK content. That is frustrating to us, and I know that it is frustrating to UK ministers. There are good examples, such as Nova Innovation’s project up in the Bluemull Sound, 80 per cent of which, I think, has a Scottish supply chain. That is an exemplar, but we must try to make sure that more projects hit such milestones, if we can achieve that.

I apologise, but I do not recognise the figures that Ms Baillie cited with regard to the Beatrice project—I would be happy to look at that. We understand that a higher percentage share has gone to Scottish manufacturing than she implied in her question. In addition, of course, the operations and maintenance expenditure will all be local. It will be spent in harbours such as Wick, which is being widely regenerated. That is a welcome development.

I reassure Ms Baillie and other members that we are taking the supply chain issue extremely seriously. I have flagged it up in the strategy as a strong priority for the Government. The offshore wind industry group has a specific supply chain focus and the oil and gas industry leadership group has an increased focus on supply chain issues, and I promise Ms Baillie and others that, through the work of such groups, we are taking an ever-greater interest in the issue. I ask members to judge us on our record, and I am sure that Ms Baillie and others will do so.

Quite a few members want to ask questions. If we are fairly succinct, everyone should get in.

I welcome the minister’s statement and, in particular, his comments about the progress that has been made on community and locally owned renewable energy and the work that is being done to establish a publicly owned energy company in Scotland.

Can the minister reassure Parliament that such a company will be at the heart of his energy strategy, given that, in today’s society, we still experience unacceptable levels of fuel poverty, and much of the profits that come from the exploitation of energy resources in this country go overseas? A publicly owned energy company is one way in which the people of Scotland could get much more benefit from the abundance of energy resources on their own doorstep.

I thank Mr Lochhead for his question, which hits on an extremely important issue. The strategy sets out our rationale for our ambition of setting up a new energy company, which is largely to do with the unacceptably high levels of fuel poverty in Scottish society. In 2016, 26.5 per cent of Scottish households were fuel poor, and many of those fuel-poor households are part of the significant group of people who we know do not switch suppliers. The market is proving very sticky, in the sense that people are not switching to less expensive energy tariffs. In the energy strategy, we have set out our intention to meet our ambition of setting up an energy company vehicle that supports economic development and which also—crucially—contributes to tackling the drivers of fuel poverty in Scotland. We will consult on that in the course of 2018. It will be a formal consultation, which will give opportunities to all stakeholders, including members across the chamber, to feed in their thoughts on the role and remit of such an organisation.

Central to our concern are the level of trust that consumers in Scotland have in the energy market and the need to improve our approach to tackling inequality and promoting inclusive growth. I welcome Mr Lochhead’s interest in the issue. I know that he has had a long-standing interest in it as a minister and as a back bencher, and I look forward to working with him and other members to deliver on our ambition in due course.

I refer to my renewable energy interests in my entry in the register of members’ interests.

Notwithstanding his comments in the statement and in the onshore wind policy statement, does the minister genuinely believe that wild land can be protected at the same time as increased onshore wind is delivered? Does he recognise the significant concerns of many environmental groups, as well as a huge number of local communities, which feel that our natural landscape has already been compromised by onshore wind?

I do not have time today to go through the onshore wind policy statement, but we recognise those issues in the documents. Obviously, our ambition to improve our performance in terms of the delivery of renewable energy must be viewed in the context of our ambition to protect important landscapes as best we can, and we ensure that full account is taken of those issues when we consider planning applications.

The cabinet secretary and I consider section 36 consent for projects over 50MW, and wild land issues are very much part of our considerations. Wild land is not a formal designation, as Mr Cameron knows, but it is important that we recognise the issue in the process. That is an improvement that we have made to the planning system in Scotland, and I think that it has been warmly welcomed. In a number of cases, the issue of wild land has been a contributory factor to the rejection of the planning application. However, equally, we do not want to give the impression that the wild land issue is a barrier to the development of sensible projects in good locations. It is obviously a factor that we balance against other factors such as economic impact and the contribution to tackling climate change, which should be a priority for all of us.

The minister described six new strategic priorities, all of which I thought that I recognised as the existing and well-established energy priorities of his Government. Can he tell us what is new about the priorities and, in particular, what new initiatives will support investment and innovation across our oil and gas sector?

Lewis Macdonald is right that there is consistency on some of our priorities, but we have provided a lot of detail about the specific actions that we propose to take forward in relation to each of the six priorities. That provides some reassurance that our strategy has been broadly along the right lines. That strategy has been informed by people in this chamber and stakeholders outside this chamber, and we are putting some meat on the bones in terms of the specific actions that we will take.

Lewis Macdonald mentioned the oil and gas sector. We are creating a new forum to help us to take forward work with academia and industry around carbon capture and storage and hydrogen, which is part of enabling the industry to have a part in the low-carbon transition. We want to commission evidence on the impact of technology and market and regulatory barriers on hydrogen and carbon capture, usage and storage opportunities in Scotland. We are supporting the Acorn carbon capture and storage project at St Fergus in the north-east of Scotland, and we will continue to work with the UK Government and the Oil and Gas Authority to progress Scottish CCUS interests.

I can perhaps write to Lewis Macdonald with the full details of the projects that we are undertaking, and I reassure him that we are putting meat on the bones of the actions that we will take on each of those strategic priorities.

The minister talked about smarter ways of storing energy. How can we expand Scotland’s capacity for energy storage?

Mr Mason raises an important point. Storage is critically important to our approach and that of the UK Government. Indeed, internationally, energy policy is focusing more on storage. The application of storage technologies will be strategically important to and deliver real benefits for Scotland, which is why we place great emphasis on it in our strategy.

Obviously, Scotland has great capacity for pumped hydro storage, which is crucial. Scotland already hosts key facilities for the Great Britain system at Cruachan and Foyers. Those stations can store large amounts of water and can release that energy when demand on the system is high, and they are crucial to our black-start capabilities.

We believe that investment in new pumped hydro storage capacity would greatly enhance the flexibility and resilience of our electricity network, but we are also working on areas such as the UK smart systems and flexibility plan. In that regard, we believe that regulatory changes are crucial to increasing Scotland’s storage capacity.

We also support Ofgem’s on-going work to facilitate the co-location of storage and renewables obligation feed-in tariffs scheme accredited projects to experiment with how we make use of storage to enable intermittent sources of energy to become a more reliable feature of our black-start capability and to provide resilience in the system. I am convinced that that can work, if we get the strategy right.

I welcome the energy strategy. In particular, I welcome the green box on page 63, which embeds the fracking ban in the energy strategy in the way that the Green Party requested in the chamber a few weeks ago.

Eleven waste incinerators have either been built or are proposed for Scotland. That is raising concerns about our ability to meet the increase in Scotland’s recycling rate. There are concerns about the impact on communities. Many developers cite the market downturn in the value of recyclates as a reason why more incinerators should be built. There is clearly a loophole in the waste regulations. Why is there no reference to energy from waste in the energy strategy, and when will the Scottish Government review the position?

I recognise that there is strong community interest in issues such as waste incineration. We do not want to be tied to any specific technology. Mr Ruskell is very experienced in these matters, and he will see that the strategy is not specific about which technology is dominant up to 2050. Indeed, it sets out some scenarios around the greater use of electricity or hydrogen just to present some alternative pathways.

I am happy to engage with Mr Ruskell on issues such as waste-to-energy projects, although colleagues, including Roseanna Cunningham, have responsibility in the areas of recycling and waste, and I do not want to tread on Ms Cunningham’s toes and portfolio responsibilities. However, I am happy to engage with Mr Ruskell to better understand his concerns and those of the communities that he represents.

The energy strategy is a living document and it will be updated as time goes on. Parliament will have the chance to influence it as we go forward and we will report back on its performance.

It is quite clear that I am not going to get through all the question requests, but please could we speed up a bit with questions and answers?

Will the minister outline the role of offshore wind in the delivery of clean green energy, particularly in the firths of Forth and Tay? How will the Scottish Government facilitate progress on those developments off the Angus and Fife coasts so that we can recover some of the time that has been lost in the near three-year delay caused by the failed legal challenge that was mounted against them?

In the cause of brevity, I will focus on two points. We are strongly supportive of offshore wind development. It is highly cost competitive in comparison with nuclear energy. We know that the strike price that has been agreed by the UK Government is around £92.50 per megawatt hour for Hinkley C, whereas it is in the region of £57.50 per megawatt hour for the latest Moray offshore project. The Forth and Tay projects are seeking to bid for contracts for difference. A contract for difference has been secured in the case of Neart na Gaoithe, but another three sites are yet to secure CFDs. We expect those projects to be competitive, and that is driving down the cost of electricity for consumers, whereas nuclear has the potential to push it up.

We strongly support offshore wind developments. We are working closely with stakeholders such as the Royal Society for the Protection of Birds, renewable energy developers and the conservation agencies to ensure that we take a balanced approach to developing that technology. It is vital for our low-carbon future and for protecting and enhancing our wildlife. We are keen to engage positively with all parties and I am confident that we can do so.

I declare an interest, in that I am in receipt of FIT scheme and renewable heat initiative payments. I welcome the publication of the energy strategy.

Given its strategic priority, what assurances can the minister give that the upcoming warm homes bill will contain ambitious measures to improve energy efficiency? Consumers across the Highlands and Islands, including in Orkney, pay a surcharge of 2p a unit for energy at the same time as having the highest levels of fuel poverty in the country. What steps will the minister take to make the case for socialising energy costs across the country?

We continue to commit significant funding to improving energy efficiency in our housing stock. It is one area in which comparable schemes in the rest of the UK have sadly ceased, but the Scottish Government has committed £0.5 billion over this session of Parliament to supporting the roll-out of Scotland’s energy efficiency programme. We are looking at some innovative projects, including the low-carbon infrastructure transition programme and SEEP pilots in Mr McArthur’s constituency, to ensure that we develop the right approaches in the right circumstances and take some of the learning out of the private sector so that we can de-risk investment in the area.

A total of approximately £10 billion is estimated to be the cost of bringing our housing stock and energy efficiency standards up to the levels that we want to attain by 2030, so we clearly want to work with the private sector. The programmes that we have put in place are substantially funded by the Scottish Government and I hope that they will benefit Mr McArthur’s constituency. We will look to develop supply chain opportunities in areas such as Orkney to support that work at a local level.

Earlier this year, the First Minister opened the world’s first floating wind farm. Does the minister agree that that venture is testament to the huge renewables potential of our seas? Will he confirm the Scottish Government’s future plans for that technology in Scottish waters?

I certainly concur with Ruth Maguire that Hywind is a very exciting project. Perhaps because of its innovative nature and its origins, we did not secure as much supply chain opportunity in it as we would like, but, crucially, it demonstrates the deployment of that technology in the Scottish context and we are confident that it is already helping to drive further interest in investment in offshore floating wind.

Crown Estate Scotland is already developing plans for further licensing rounds up to 2030 and it is specifically looking at what provision can be made for both traditional fixed offshore wind and, increasingly, floating offshore wind, which I hope will benefit many constituencies across the country. I look forward to working with both Crown Estate Scotland and Marine Scotland on that.

What level of feasibility study has been undertaken to establish the commercial and operational viability of the state-owned energy company?

As I set out in my response to Mr Lochhead, considerable work is going on to establish the nature of the challenges that we face. I am sure that Mr Golden recognises that it is challenging to create an energy company. We have been doing extensive work with stakeholders, and propose to hold a formal consultation in the next year. We are working on a strategic case, which is being developed through a private contract. That work will support the Government by providing the necessary underpinning analysis that will allow us to take forward our work on the energy company. I hope that in due course we will be able to talk more about that, but if Mr Golden is interested, I would be happy to discuss it with him. We are doing the necessary due diligence. It is a serious issue, and I can assure members that we are taking it very seriously.

Building on the previous question, I ask the minister whether he can give any more detail on the proposed energy company in light of the feedback on the strategy consultation, particularly in relation to how the not-for-profit company will help to tackle fuel poverty, not least in rural Scotland.

I made the point in my statement that we have identified a number of stakeholders who are very supportive of the principle of the work. Indeed, Ofgem has been widely quoted as being supportive of our efforts, and that is welcome. I have to remind myself that it has been only 71 days since the announcement in October, so it is perhaps not reasonable to expect a blueprint to be provided at this time.

I assure Claudia Beamish and other members who have expressed an interest in the issue, through parliamentary questions and other routes, that fuel poverty is a key driver behind why we are trying this approach. We obviously have an interest in protecting consumers. Innovative ideas around price caps and other measures have been put forward but, in isolation, we think that they may not be successful. Competition in the market has increased over recent years and the sheer market dominance of the big six energy companies has slipped back from 98 per cent in 2013 to about 80 per cent today. That is thought to be one means by which downward pressure can be maintained on prices. I am happy to engage with Claudia Beamish as our plans develop.

That concludes questions on the Scottish energy strategy. I apologise to those who wished to ask a question but were not able to.