Meeting of the Parliament

Meeting date: Tuesday, January 24, 2017

Official Report 879KB pdf

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Draft Scottish Energy Strategy

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

14:24  

The success and wellbeing of Scotland’s people, communities, businesses and public services are underpinned by the supply of reliable energy. Affordable energy provision is a prerequisite for our quality of life and good health, and for ensuring that we have a productive and competitive economy.

Our energy sector already provides high-quality jobs and a vibrant climate for innovation in established sectors such as the oil and gas industry, where the skills and expertise that have been gained through more than 40 years of operating in the North Sea will prove to be invaluable to the engineering and innovation challenges in creating the energy system of the future, and in new renewable energy sectors such as offshore wind, wave and tidal energy, alongside grid-scale battery storage and pumped hydroelectric storage.

I announce to members that the Scottish Government has now published a consultation on our draft Scottish energy strategy, which sets out a vision for the future of energy between now and 2050. Our climate change ambitions underpin all the choices that are laid out in the draft strategy and have, in turn, been determined by our commitments under the Climate Change (Scotland) Act 2009. The strategy has been developed in concert with, and as a companion to, the draft climate change plan that was laid before Parliament and presented to members in the chamber by the Cabinet Secretary for Environment, Climate Change and Land Reform last week.

As it stands, the task to decarbonise our electricity production has been largely achieved; the equivalent of 59.4 per cent of Scotland’s gross electricity consumption is now met by renewable energy and we are well on our way to meeting the 2020 target of 100 per cent—albeit that United Kingdom Government policy changes have made our progress more challenging.

Our options in terms of the scale of supply of energy have substantially broadened in recent years. Consumers can now generate energy for their own needs from solar panels or a wind turbine, for example. Scotland has been at the forefront of the drive for community and locally owned renewables—there are more than 15,000 locally and community-owned renewable energy sites in Scotland, and there is installed capacity of 595MW, which has surpassed our target of 500MW five years early. By the end of 2015, we had seen the largest annual increase in renewable heat output since measurement began: it went up by more than 1,100 gigawatt hours in a single year. In 2015, Scotland produced enough heat from renewable sources to meet between 5.3 and 5.6 per cent of non-electrical heat demand.

We can all take pride in such successes, but it is clear that more progress will be required, in particular in the supply of low-carbon heat and transport, if we are to remain on track to meet our ambitious climate change goals. To maintain momentum, a new 2030 all-energy renewables target is proposed in our energy strategy, which sets an ambitious challenge to deliver the equivalent of half of Scotland’s energy requirements for heat, transport and electricity from renewable energy sources. I hope that members will welcome that landmark proposal, given the support that was shown for such an ambition last month in the chamber, during a debate on support for Scotland’s renewables sector.

Our renewables sector is facing an uncertain future. Unwelcome cuts to UK Government support schemes are jeopardising a very strong investment pipeline and strong Scottish supply chain across a range of renewables technologies. Onshore wind, for example, is now a mature technology in which a number of issues need to be addressed, including the approach to repowering existing wind farms that are coming to the end of their planning consent, or extending the life of sites where it is appropriate to do so. In our accompanying onshore wind policy statement, we set out in more detail our approach to those important matters.

Our draft energy strategy calls on UK ministers to do more to restore confidence in the sector, in the light of the UK’s slide down the investment-attractiveness league table, and it calls on the industry itself to continue to deliver the cost reductions that are required to ensure that low-carbon energy is affordable. Our strategy sets a challenge to the industry to make Scotland the first area in the UK to host subsidy-free onshore wind. There are real cost reductions, such as those that have been announced today by the offshore wind programme board, which show that offshore wind energy costs have fallen by 32 per cent since 2012. That is proof that offshore wind is rising to the challenge to reduce its costs.

Scotland can be proud of how we are playing our part and leading the way in marine energy and in development of floating offshore wind projects off our coastline—a technology that is well suited to our deeper waters.

The strategy reiterates our commitment to delivering a stable and managed transition to a low-carbon economy, and highlights a range of technologies and fuels that will supply our energy needs over the coming decades. The strategy makes clear our commitment to the oil and gas industry as a key contributor to the security and stability of energy supplies throughout our transition, with around three quarters of total energy consumption in Scotland currently being supplied by oil and gas. Production of oil and gas in the North Sea and west of Shetland is highly regulated, with some of the most advanced and, comparatively, least-carbon-intensive production methods of their kind anywhere in the world. Our oil and gas sector will continue to make a positive contribution as the engineering and technical bedrock of our wider energy transition.

Advances in technology mean that new and innovative ways of using hydrocarbons are emerging, and they will continue to emerge in the decades ahead. Energy sources such as hydrogen—a zero-carbon fuel at the point of use—have the potential to reduce substantially the total system cost of decarbonisation, to provide a range of services to our energy system and to provide integrated low-carbon solutions across the heat, power and transport sectors. Such innovations are already here. For example, Aberdeen hosts the largest fleet of hydrogen-powered buses in Europe, supported by two hydrogen refuelling stations, and in the Levenmouth community energy project, renewable wind power is being used to run a fleet of hydrogen vehicles, including Fife Council vans and refuse-collection vehicles.

The strategy makes it clear that the Scottish Government is committed to examining the evidence and to engaging with the citizens of Scotland to gather their views and to understand their needs and perspectives. Our approach to evaluating the impacts of unconventional oil and gas is an example of that evidence-based and measured approach. As I outlined in my statement on 8 November 2016, we will shortly launch our full public consultation on unconventional oil and gas, so that the people of Scotland can express their views on that important and contentious issue. The results of that consultation will be a key consideration when we finalise our energy strategy later this year. Our draft energy strategy confirms our proposal that underground coal gasification will play no part in our energy mix.

Our energy strategy is not just about energy supplies. Consumers of energy are at the heart of our whole-system approach, and our patterns of energy use are changing, too. We are more efficient than ever in using energy, but major shifts lie ahead. How consumers engage with those energy choices will be informed by smart technologies that provide better information on energy use and a better platform for informed decisions on consumption of energy.

Scotland will need a more flexible energy system that can accommodate the many choices that consumers and generators will make in the future. That energy challenge represents an exciting opportunity to capture the economic benefits of pioneering approaches here in Scotland. Smart and controlled charging of an ever-growing number of electric vehicles in Scotland will, in itself, grow demand for electricity, while providing energy storage capacity, capacity to absorb intermittent loads from renewables generation and, potentially, a source of grid power input, when required.

Most important, we recognise that energy remains unaffordable for too many people in Scotland. That is driven by high energy prices, but another key driver is our housing and non-domestic building stock, which is all too often profoundly wasteful of energy, despite our very significant investment in improving the energy efficiency of Scotland’s homes. The draft energy strategy seeks to address the needs of those who are least able to pay for their energy, by supporting energy solutions that provide warmer homes and better outcomes for consumers.

Scotland’s energy efficiency programme—SEEP—is a long-term programme to improve energy efficiency in both domestic and non-domestic buildings with the ultimate aim of decarbonising Scotland’s heat supply, which will make energy more affordable and reduce carbon emissions from our built environment. We have committed more than £500 million to SEEP up to 2020-21. SEEP is currently in its design phase. Today, we are also publishing two key accompanying consultations in support of the draft Scottish energy strategy. The first focuses on options for the programme and policy design of SEEP and the second consults more specifically on the role that regulation could play in supporting the development of district heating, as well as on a framework for planning at local level of heat decarbonisation and energy efficiency programmes.

Scotland is now a pioneer in the development of innovative local energy systems. Heat, electricity and storage technologies, combined with demand management and energy efficiency measures on an area-by-area basis, could realise substantial local economic, environmental and social benefits. Scotland’s communities and island populations are increasingly playing an active and important part in the delivery of innovative local low-carbon, smart-energy systems, in partnership with the private and public sectors. Those projects benefit from funding support from the Scottish Government, including the local energy challenge fund, which has to date allocated £31 million to a wide range of innovative projects.

In addition, under the low-carbon infrastructure transition programme, we have already supported more than 40 low-carbon projects, and today I can announce that around £50 million will soon be awarded to 13 low-carbon demonstrator projects at sites across Scotland. Those projects are at the cutting edge of innovation and will provide a solid basis for our learning as we mainstream the local energy approach.

I am proud to present our draft Scottish energy strategy to Parliament and to launch a consultation exploring the choices that we face about our future energy system. I invite members throughout the chamber and all our constituents to have their say on key decisions that will determine the shape of Scotland’s energy future.

I hope that, in the months ahead, as we finalise our strategy, the document will stimulate well-informed debate on the energy challenges in Scotland and the policies that are needed to meet our aspirations to deliver a secure and sustainable energy future for all—an outcome that will, I have no doubt, be in the best interests of our communities, our economy and our environment.

The minister will now take questions on the issues raised in his statement. I intend to allow 20 minutes for questions, after which we must move on to the next item of business. As always, my mantra is that members should try to make their questions brief and the minister, if he can, should be brief and succinct as well.

Before I start, I note my registered interests regarding renewable energy.

I welcome the new targets to push our renewables ambitions even further. Since the inception of the UK Government’s contract for difference programme, Scotland has received 40 per cent of its funding for projects from the UK Government, which is a fact that is acknowledged by the Scottish Government.

It is right that we should be at the forefront of the renewable energy sector, but the minister will know that the low-hanging fruit has been picked. We now need significant investment in renewable heat and we must not waste heat from our homes. That policy is handled here in Holyrood, but the current homes insulation budget is already £1 million behind where we were two years ago, which is not good enough. The Scottish Conservatives have called for all homes to be rated energy performance certificate C or above by 2030 and for £400 million a year of investment by the end of this parliamentary session in order to reach renewables targets. That policy is supported by stakeholders such as WWF, so why does the minister think that his budget of £114 million is sufficient when stakeholders are telling him that it is not?

I recognise the importance of tackling fuel poverty and of improving the energy efficiency of our buildings. I hope that we have common ground on that, although we clearly have a difference of opinion about the Scottish Government’s approach.

From my previous tenure as Minister for Environment and Climate Change, I know that there has been much chopping and changing of policy on the green deal and other measures to support energy efficiency in recent years. Obviously, the green deal has been cancelled, and that had a direct impact on the Scottish Government’s budget. We have tried to replace the loss of green deal funding and we have put in substantial investment.

The fact that £500 million is being invested by the Scottish Government over the period up to 2021 is not a minor matter, but I reassure the member that it is just part of a longer-term programme that goes well beyond 2021. We are launching the consultation on Scotland’s energy efficiency programme to elicit views on how best to implement it. It is a national infrastructure priority and a very high priority for the Government and, I hope, the whole Parliament.

I am happy to work with the member and his colleagues in the Scottish Conservatives, as they have positive ideas about how we implement SEEP. Mr Stewart, the Minister for Local Government and Housing, will also be happy to engage with Mr Burnett. The Scottish Government has been putting its money where its mouth is. There is not an equivalent programme in England at the moment, so we feel confident that we are making great strides forwards. We can always do more, but we are making significant investment in energy efficiency.

I declare an interest as the vice-president of Energy Action Scotland.

I thank the minister for the advance copy of his statement and for much of the content. In particular, I very much welcome the 50 per cent renewable energy target. That was in Labour’s manifesto and it was in the Scottish National Party’s manifesto, too. It is ambitious and rightly so; the challenge will be in the implementation and we look forward to examining the detail.

Although Scotland more often than not generates more energy than we use, there have been occasions when we have been required to import energy. Baseload is the key issue, yet the statement is short on what the Government will do to ensure that the lights stay on. What actions will the Scottish Government take to maintain baseload, and does the minister intend to continue our helpful partnership with the rest of the UK energy market?

I am concerned that we measure the effect of what we do on people so, rather than inputs and outputs, I want us to measure outcomes. Will the Scottish Government ensure that the focus is on how many people it lifts out of fuel poverty, rather than on how many houses it insulates?

I have some sympathy with Jackie Baillie’s latter point. The issue is ultimately about helping people to tackle fuel poverty—I think that we are all in agreement that that is one of the biggest problems that we face. We deal with constituents on a regular basis who face the choice between heating their homes and eating—that is very far from being a satisfactory position. It is not entirely my decision, but I have sympathy with the point about trying to focus on how many people we help rather than on heating houses for the sake of heating houses; this is about helping individuals, so that was a constructive point and I will work with colleagues in the Government to see how we can implement that.

We will work with stakeholders to identify our approach to tackling fuel poverty. We will look at having a renewed strategy for that, at how we measure it and at the scope of the targets in that respect. I hope that there will be the possibility to engage with Jackie Baillie and her colleagues on how we take that agenda forward.

On the flexibility issue, I recognise that there is an important need to ensure that we have a secure and reliable supply of energy. I want to continue to work with UK Government ministers to achieve that end. I have engaged positively with them on issues such as pumped hydro storage. I know that looking at battery storage is one of the focuses of the industrial strategy south of the border, and I hope that we can work together on that. It does take two to tango, as I have discussed with Ms Baillie—[Laughter.]

That sounded like an offer.

It was not a comment directed at Ms Baillie. It was a reference—

Don’t keep digging, minister.

It was a reference to UK ministers rather than to Ms Baillie, whom I have always worked very well with. [Laughter.]

We recognise the need to generate baseload, so it is important that we look at what we can do around areas such as thermal generation as well. An environmental framework is currently in place that is harmful to the establishment of replacement plant for Cockenzie and Longannet. Obviously, there is an existing consent at Cockenzie, but we want to work with the UK Government to create a propitious environment for that baseload to happen.

I have 14 people trying to get in, so can everybody be brief and can I ask the minister, with respect, to try to shorten his answers?

Can the minister give further details of how he believes the proposals in the energy strategy will help to reduce social inequalities and foster inclusive growth? Will he outline what is being done to ensure that individual communities benefit from renewable energy projects?

We have touched on issues to do with fuel poverty. There is a particular rural dimension and I know that Highlands and Islands Enterprise and the Joseph Rowntree Foundation have done work in the past looking at the high cost of living in rural areas. I know that the cost of living is higher in rural areas, which means that fuel poverty is a particularly acute problem in rural areas, particularly in the island communities of Scotland.

Scotland’s consumers, households and businesses are very much at the heart of the strategy and we are looking for opportunities for consumers and suppliers alike to address the impact of fuel poverty in particular. There will be a renewed focus on energy efficiency. We want to seek—as I referenced for Ms Baillie—an energy market that works for everyone, working with UK ministers where possible. We want to create local, vibrant energy economies across Scotland in which we can do that and in which there are perhaps local arrangements for electricity supply and demand. We are committed to increasing the scope of that and to working in partnership with host communities where renewable projects are taking place.

We have upped our game—we met our target for the amount of community energy to be generated by 2020 five years early, so we have doubled the 2020 target. A key part of our energy strategy remains to achieve 1GW of community and locally owned energy by 2020, and we have an aspiration for at least half of newly consented and renewable energy projects by 2020 to have an element of shared ownership. That should also help to ensure that economic benefits are felt at a local level.

I start by referring to my entry in the register of members’ interests in relation to a smart meter company, which is based elsewhere in the UK.

The minister has just announced yet another delay on a decision on fracking, more than two years after the initial moratorium was introduced. In his statement, he stressed the importance of decarbonisation and we agree with that. However, is the minister aware that Scotland is currently importing more than 40,000 barrels of shale gas every day from the US? That is an unnecessary 3,000 mile journey, which is resulting in a significantly increased and unnecessary carbon footprint at a time when we could be using—

Question, please.

—we could be—

Question?

—extracting—

Question?

—that gas domestically. Does the minister not recognise the huge benefits that would be available for jobs and the economy in Scotland?

With the greatest of respect to Mr Lockhart, that is a matter for the people of Scotland to inform us about through the consultation, which is on track—as promised in our November statement—to take place at the end of this month. Mr Lockhart will not have long to wait for the consultation and I look forward to reading his submission to it.

However, I point out that at the time of my statement on underground coal gasification, I was heavily criticised by members on the Conservative benches for taking a decision that was measured and based on evidence, as was our approach rather than the UK Government’s approach, but, lo and behold, the UK Government has followed Scotland’s lead and has done exactly the same. Perhaps Mr Lockhart will listen to our evidence-based approach and to the determination that we will make when we bring the matter to Parliament and allow Parliament to vote on the future of unconventional gas in Scotland.

Meeting these energy transition targets demands political leadership, but if local supply chains are to benefit and if, in turn, we are to generate local jobs, economic leadership is demanded as well. Is the Government committed to a plan for the economy to go with the energy strategy, so that we maximise the benefits to local manufacturers, local suppliers and local jobs?

I certainly agree with Richard Leonard. One of the key objectives of the Government—which Richard Leonard obviously shares from what he has said—is to try to ensure that, in making a low carbon transition, we generate local jobs in Scotland. It is part of the implicit deal that was struck in 2009 with trade unions and civic Scotland that we would make this historic transition to a low-carbon economy but do so in a way that brought people with us and that helped areas that were high carbon to transition to low carbon.

It is important that as industry develops in response to the climate change plan and the energy strategy that we have set out today, we work hard with it to ensure that we convert the opportunities into jobs in Scotland. We have launched an innovation action plan, which refers specifically to low-carbon issues and tackling climate change. We also have our established manufacturing action plan for Scotland, which is not badged as an industrial policy but which is in effect a component of an industrial policy. We look forward to working with Mr Leonard and others to take forward that agenda and to secure the vital economic opportunities that we hope can come from the strategy.

I warmly welcome the minister’s ambitious strategy. As he will know, I have been a long-standing supporter of the creation of a publicly owned national energy company in Scotland to ensure that our people capture more of the benefits from our natural resources. Will he assure me that work is under way to create such a company? If the Danes, the Norwegians and those in other countries can do it, I hope that we can do the same, so that our people get not just the crumbs off the table but the maximum benefits from our vast energy resources.

I recognise Mr Lochhead’s strong commitment to the issue. I well remember having a conversation with him on the subject as long ago as 2014. I reassure him that, although the issue might not have been referenced in my statement, it is very much part of the energy strategy. We have made a commitment to explore the role and remit of a Government-owned energy company. A specific question in the energy strategy consultation invites views on the potential role for such an organisation, and I look forward to Mr Lochhead’s considered contribution to that.

We believe that such a body could address specific market failure issues and add value through accelerating progress towards relevant policy aims or goals that are set out in the strategy. It could even take on a number of roles in relation to the delivery of projects. There is a potential for the delivery of support for existing and new schemes and initiatives. There is also the potential to deliver energy infrastructure, including district heating, or to co-ordinate the procurement of energy efficiency and heat technology measures. Such a body could act as an energy supplier or even administer the Scottish renewable energy bond, on which there is another question in the consultation. We welcome people’s views on the potential role of such an organisation in all those matters.

We welcome the consultation on the regulation of district heating but, in light of the fact that less than 1 per cent of homes are connected to district heating, what steps will the Government take to develop innovative financial models such as shared stakeholder investment to increase access to district heating?

In fairness, I recognise Maurice Golden’s strong interest in the area. He has raised the issue of district heating a number of times, and I commend him for taking it forward. It is another issue on which I hope that we can have common ground.

The Government has an ambition to deliver 1.5 terawatt hours of Scotland’s heat by district or communal heating by 2020. As part of the wider strategy to 2032 to support the environment secretary’s climate change plan, we are looking at what more we can do to step that up. That is why we have the encouraging work that the special working group on regulation has done to inform our thinking on a regulatory environment that might make that happen faster and secure greater private sector investment.

We have had considerable international interest in what we are doing in Scotland. Scotland and London are probably the two locations in the UK that are attracting the most interest in relation to district heating projects, because we are getting the regulatory position correct. I commend my predecessor, Fergus Ewing, for taking forward that work. I have picked up the ball from him.

I congratulate the Scottish Government on rising to the challenge that the Greens set in the Parliament last month by setting a target of half of all our energy being from renewables by 2030. The Government must now match that with a commitment to keep Scotland frack free.

Further to the minister’s previous answer on heat, how will he switch nearly 2 million homes to low-carbon heating by 2032, which will clearly require more than just district heating? That is the number of homes that will be required to be dealt with to meet the 80 per cent domestic heat target that is in the climate plan that the minister just referred to.

Mark Ruskell makes the fair point that we cannot rely just on district heating. We do not think that every house will have a district heating solution, so we will have to look at alternatives, and we are looking at alternative fuels. There is a potential for hydrogen to replace existing fuels. Not that long ago, it was part of the town gas that went through the mains in a lot of towns in Scotland, and it may have a role. However, that is a question for the consultation to answer.

On demand management, we are investing heavily in SEEP to reduce people’s consumption of energy and to reduce the waste or loss of heat, which will also help. We are trying to reduce demand and improve energy efficiency and to improve the supply of heat from renewable sources, and I hope that we can get there. I welcome potential engagement with Mr Ruskell on his ideas on how we can do that.

I declare an interest as the owner of a microturbine and I join other members in welcoming the Government’s acceptance of the demands of the Scottish Liberal Democrats and others for a target of 50 per cent of energy coming from renewables by 2030.

On transport, how does the minister expect the ambitious 33 per cent emissions reduction target that the Cabinet Secretary for Environment, Climate Change and Land Reform set out last week to square with the expectation in his draft strategy

“that effective biofuel use for transport decarbonisation in the overall transport sector is unlikely to reach above 10% for some time”?

Will the Scottish Government’s approach to business rates help or hinder efforts to make Scotland the first area in the UK to host subsidy-free onshore wind?

There are two issues in Liam McArthur’s questions. The decarbonisation of transport is one of the biggest challenges that we face as a society. I accept that biofuels will not be the only answer that we need to explore. That is why it is important that there are measures in the energy strategy—I appreciate that Liam McArthur has not had a chance to see them—on decarbonisation through electrification as well as hydro vehicles and hydrogen, which I cited in my statement. Hydrogen is being used in Aberdeen for a bus fleet. It is also being used in Fife, and I commend Fife Council for using hydrogen for refuse-collection vehicles, smaller vans and light goods vehicles.

Good pilot work is being done, including some in Orkney. Liam McArthur is right to have mentioned that Orkney is a bit of a living laboratory. Very good work is being done on using hydrogen in the ferry fleet there, which takes advantage of the off-grid nature of Orkney, where surplus electricity that has been generated is used to create hydrogen for use in transport.

We are considering all those issues and we would welcome feedback from industry on how best we can achieve our goals.

Will the minister give more detail about how the energy strategy will interact with the climate change plan and offer his thoughts on the news that the UK Government’s dithering on carbon capture and storage cost the taxpayer £100 million because of the cancellation of its £1 billion CCS competition, in which Peterhead was the front runner?

That issue is hugely important. I do not want to strike a discordant note, but the decision on Peterhead was pretty disgraceful, in that investors were led to believe that there was support, but it was pulled from under them at the last minute.

I appreciate that members have not had an opportunity to look through our energy strategy in detail. In it, we cite the importance of CCS as a technology for demonstration in Scotland. We believe that near-term demonstration of small-scale projects, leading to medium and large-scale deployment of CCS, along with the development of CO₂ utilisation—which potentially has an economic use in itself—will be critical for the cost-effective decarbonisation of heat, power and industry.

We regret strongly the fact that the UK Government withdrew all the funding for the £1 billion CCS competition. We will try to persuade it of the logic of carrying on with investment in CCS, because that is an important part of the future energy supply in Scotland. The development of CCS would protect Scottish businesses against future carbon price rises and secure economic benefit for the supply chain, to pick up Mr Leonard’s point. That knowledge and expertise could also be transferred to international markets, where there is growing interest in CCS, and it could allow Scotland to play a leading role in global decarbonisation if it is possible to do so.

As the minister said, our climate ambitions must underpin all the choices that are laid out in the draft energy strategy. Will he explain what synergies there will be between Parliament’s scrutiny of the draft strategy and the draft climate change plan, and what formal assessment is being made to ensure that the transition to the low-carbon economy is a just one for affected workers and communities?

Claudia Beamish’s colleagues made a similar point about the need to take into account the impact on society. Part of the challenge that all developed economies face in transitioning from a high-carbon model to a low-carbon one is in ensuring that we take people with us and do not break the economy in the process. I appreciate that, sometimes, the process goes more slowly than some folk would like it to, but we have to have the leading ambition. The targets set the frame, allow industry to see the future that is ahead of it and help industry to migrate over a period to a different model.

I am happy to engage with trade unions and others on how we best advance such work. I am sure that the Cabinet Secretary for Environment, Climate Change and Land Reform is also aware of the need to ensure that we take those points on board. I look forward to engaging with Claudia Beamish on the energy aspects.

That concludes questions. I apologise to the five members from across the parties whom I have been unable to call because of time. I have to move on to the next item of business.