 Good morning and welcome to the 17th meeting of the Economy Jobs and Fair Work committee. I would ask all present to turn electrical devices to silent or off if they are likely to interfere with the sound system. I have apologies from committee member Gil Patterson this morning. Item one on the agenda is the decision by the committee to take item three yn private? Are we all agreed on that? Yes. Thank you. This morning, our first panel of witnesses on the draft energy strategy. We have three witnesses with us today, and I say to the witnesses that the sound desk will deal with the sound system so no need to press buttons or do anything apart from speak into the microphone. I ask committee members and witnesses to try to be as succinct and to the point in questions and answers as possible. Witnesses do not have to answer every question, but you may wish to come in on questions as themes develop. First of all, we have from my left to right Theresa Bray, Elizabeth Layton and Janet Archibald. Perhaps each of the witnesses could simply tell us who they are and very briefly the organisation they represent what it does. Hi, I'm Theresa Bray. I'm the chief executive of ChangeWorks. We're an environmental charity delivering a range of services. We act as the managing agent for quite a number of the area-based schemes working with the local authorities in the southeast. We also deliver Home Energy Scotland, both in the southeast Scotland and the Highlands and Islands, and part of the consortium that delivers warmer home Scotland. We're also specialist in behaviour change. We believe that we have to integrate technology with people who live in homes, who work in buildings, and we're not going to be able to just get a technological fix, but we've got to think about the people who work there as well. Hello, I'm Elizabeth Layton. I'm a policy adviser with the existing Homes Alliance, which is a coalition of housing, anti-poverty and environmental bodies, as well as business, working together to argue for greater investment and effort into improving the energy performance of our existing housing stock to achieve both the eradication of fuel poverty and meeting of our climate change targets. My name is Janet Archibald. I'm the energy engineer for Fife Council. I work on the non-domestic side of energy management, mainly looking at delivering energy efficiency projects across primary schools, nurseries, care homes, leisure centres and so on. That's been my main area of work over the past, over most of the time that I've worked at the council, which is since 2008. Thank you very much to all of you for coming in today. I would like to start with a question about current domestic energy efficiency schemes and also current business and public sector support. If you had comments on what currently works well, what aspects of existing schemes might benefit from change and also what challenges for these should be addressed by the draft energy strategy? I don't know who would like to start. The Government has had a lot of ambition with regard to energy efficiency and has had a number of schemes over the years, such as the start-of-home insulation scheme, and a lot of the easy hits that have been achieved. We are going on to having to take a more challenging approach. One of the things that has worked well is, first of all, the easy ones are getting lofts and cavities insulated. We are moving towards the more external wall insulation, which has been, though we talk about them being area-based, they've actually been at a very small scale, but have worked well. We have had mixed tenure estates, particularly your system-built estates, where there has been a lot of right to buy the combination of social housing with the private sector. Those area-based schemes have worked well, but they have only been tackling those who are probably more likely to be in fuel poverty. Our largest energy users are not those in fuel poverty. If we are going to be meeting the climate change targets, we have got to be starting to engage with something that we say is that the able-to-pay market is perhaps better to say that it is not fuel poor, because, obviously, not everybody has got access funds there. How do we tackle that, which is not really engagement with that? We have also had much less engagement with the non-domestic sector. There has been progress in some of the public sector stock, but there is much less progress within the non-domestic private sector. One of the things that we really need to start looking at is a proper area-based approach to see how we can tackle whether it is swathes of Edinburgh, or people's down in the borders, or things like that, to see how we can engage everybody, both the fuel poor and the non-fuel poor, both the private sector businesses and the public sector, to see whether we can make those big differences. In terms of what is working well in Scotland in the very fortunate position that we have a lot of excellent building blocks in place for CEP to be developed from, we have the HEAPS, the Home Energy Efficiency programmes, which are working relatively well. We have a good blend of the local area-based schemes plus a national fuel poverty scheme to make sure that nobody misses out from having their needs addressed if they are out with an area-based scheme. That balance of local and national is good. More recently, the warmer home Scotland programme is seen as a gold standard in terms of performance and providing quality assurance, but also delivering on other co-benefits, such as local jobs in communities. That is seen as a model that can be built upon. We also have a very good nationally funded advice service with Home Energy Scotland. Again, that can be built upon to incorporate some of the elements of behaviour change, advice and direct support to householders before and after measures are delivered. In terms of challenges, while we have those excellent building blocks, what we have been lacking is the long-term certainty of policy and funding for householders, for business, the energy efficiency and renewables industry, for government decision makers to know that this is the plan and this is the plan going forward for one, two decades, but that is now indicated with CEP. If the bright policies are put in place, along with long-term budgets, then that certainty can be provided and I think the market will respond and householders will respond. The other aspect that is missing is demand. People do not want energy efficiency enough and there are lots of reasons for that, but part of it is market failure. The costs of energy are not really, the social costs are not incorporated in the price. That needs to be addressed by regulation. Again, that is being consulted on as part of CEP, enhanced advice and information provision, as I have mentioned, and improved consumer protection. Again, that is something discussed in CEP. I think it is all there to play for, but it really depends on the leadership that we see from government right from the top, with the First Minister and her cabinet saying that this is one of our number one priorities for the next several Governments. I can only speak on the non-domestic side. I think that the problems that you have got are very challenging. I have done my best to do as many projects as possible that are economic to do on the non-domestic side. We will have to start doing things that do not add up from our business case point of view, so we will need more money to be able to do them. What you can make in terms of cuts to your energy, your carbon emissions to a school, even if you do the lights and you do as much as you can on the heating side, you are still not going to get down to the targets that you have set for yourself. The barriers are enormous. I think that it is not really addressed by what I have seen to date in everything that has been put forward. In our case, we are looking at keeping our buildings wind and water tight and doing the essential maintenance and trying to clear maintenance backlogs. I have to compete against that when I am looking to push energy efficiency. I have to compete against roof repairs or doing extensions on buildings because there are more children in an area or that kind of thing. The barriers that we have are things like asbestos, whether buildings are listed or not. We have a lot of buildings that do not have wet systems. They are heated by direct electric heating, so you cannot substitute other kinds of fuels unless you put in some kind of wet system into the building. The timescales that you have got are very challenging as well. For doing the Pathfinder project, we found that there was not enough time to get everything ready for the whole thing to be done in the timescale that was given. We need longer than one year to plan and execute projects. We have to have a longer timescale, like two or three years, knowing what funding is going to be available. I speak as someone who has tried to do as many projects as possible across the board, across our entire non-portfolio stock. For schools, for example, we have 172 schools where we have done an energy audit. We have 175 buildings that are not schools where we have an energy audit. We have tried to do as many projects as we can across those buildings. We now have real challenges to go forward from here. Thank you very much. On that come to a question from Richard Leonard. Thanks to each of you for making very useful and, in some cases, quite provocative submissions. I just wanted to ask to begin with a very broad question, which is that the dual vision of the energy strategy appears to be one demand reduction, which you have spoken about already, but also the decarbonisation of the energy supply base that we have. Do you think that the Government is able to reconcile that with its continued pursuit of economic growth and its inclusive growth strategy? I would like to say that, with the energy strategy, we really welcome that the energy strategy takes a whole system view, that it is looking at energy demand and energy generation together. I think that there still is some way to go with changing the culture around our energy policy. When you go to meetings about the energy strategy, it still seems that 75 to 80 per cent of it is still all about the generation side and growth and jobs and all related to that. It is a step towards that direction. In terms of how it is reconciled with economic growth, that is not something that we have commented on directly, but what I can say is that we are disappointed in the ambition for how much energy and heat demand is reduced over the course of CEP and in the draft climate change plan. The expectation for the domestic sector is only for a 6 per cent reduction in heat demand, and we think that it should be much more ambitious. In reality, what they are predicting is a growth in heat demand because they are projecting a 15 per cent growth in heat demand, yet only cutting 9 per cent off of that. We believe that there should be no growth at all, and indeed there needs to be a reduction over that period. Research that we have called upon by AEA Ricardo suggests that there needs to be a reduction in heat demand of 30 per cent across the building stock as part of the energy mix. When we are talking about energy mix, it is not just where the supply side is, it is energy efficiency playing a part of that. In our response on the energy strategy, as well as with CEP, we have called upon the Government to spell out what they see the energy mix as going forward and what proportion energy efficiency needs to play to be meeting renewables targets, climate change targets in order to make it affordable. After all, the cheapest form of energy is going to be the energy that we do not use. The vast majority of energy efficiency projects have got a positive payback period, so they are a very sound investment to be undertaking, both for individual households if you look at the long term and for the private sector. Part of that is that we need to take the longer-term timescales to look at the issues to get to those paybacks. If we also look at decarbonisation, in the long term, we have to find a solution. The majority of the buildings that we live in are going to still be there in 2050, so we are going to have to deal with those buildings. The workplaces are going to be there. Unless we start taking a planned approach and dealing with it now, we are going to hit major problems in the future. Having a planned approach, whether it is going to be improving the energy efficiency properties or looking at alternative methods of heating, whether it is district heating or decarbonisation of the gas network, will take a long time. Infrastructure projects will take a very long time, so if the economic stability in the long term, we have to start planning ahead. You asked whether it is consistent with growth. I would say that energy projects and energy efficiency work of all kinds are consistent with growth. I feel that the projects that we have undertaken in Fife Council have been stimulating for the local economy, because every time you do a lighting project or a captive wall insulation or any kind of project, you are stimulating a little bit of growth. It is whether it is local growth or perhaps it is coming from Ireland or other places. When we have done a couple of biomass boilers, it has been the Irish companies that have come in and done it, but I still think that that is stimulating growth anyway. Some of it may go back to Ireland, but some of it is going to remain where we are. Biomass projects want your fuel chip to come from a local source as much as you can. We have specified that we want as much local wood as possible, so that wood has to be obviously grown and harvested and chopped and prepared in the local environment. That is consistent with economic activity in the local area. Where we are slightly short, struggling is procurement opens up to the entire Europe. If we could specify something, it could come a slightly shorter distance in some way, which would help. You should be trying to reduce demand as much as you can before you are doing renewables. Renewable generation is a great thing, but you want to try to reduce the demand that you have as much as you can before you start doing generation of any kind. Sorry, I am losing my place here. Sorry, I have lost my focus a little bit. That is all right. I do not know Richard. My colleagues will ask questions in due course about the supply chain, because I think that that is an extremely important area and one is an economy, jobs and fair work committee where I am especially interested in. However, I just wonder if I could take up something that was in the existing Homes Alliance submission, which is on a slightly different subject. It is about delivery. I notice that, in the paper that was submitted, it states that we believe that there should be an independent body with the remit for delivery of seep established through the Warm Homes Bill. First of all, I wonder whether Elizabeth Leighton could elaborate on that and what that would look like and if there were equivalent bodies already existing in other areas of policy. What that would look like and, in turn, if Theresa Bray and Janet Archibald from their perspective could comment upon whether that was a necessary vehicle that was needed to take this to the next level. I am happy to speak on that point. This is something that we have thought about over the last few months and then in more detail once we have dealt in depth with the consultation. We have thought that, to deliver it, this is such a massive infrastructure project. Rightly so, we are talking about our entire building stock and very ambitious changes that we foresee that need to happen for both social and environmental reasons. We can gain so much, but we have heard about some of the challenges already. It is not going to happen unless it is given the right profile, the leadership and the resources to deliver it. It is not going to happen by being on the edge of a few civil servants' desks. They are working hard. I do not quibble with that, but it is not their A number one job that they have to do day in and day out. They have other responsibilities and they have to keep within their portfolio. Once the Government sets the targets and the framework and policies are set by Government with input from the Parliament, we think that it is the place for an independent body to deliver on that strategy and to report on that strategy. With such a project that is lasting over several administrations, we are talking up to 20 years, 2038—that is a long time—big budgets. The Government has estimated 10 billion, but I think that it will probably be much more when you are talking about the entire housing stock, possibly a role for regulation, research, innovation. There is a host of issues there that it entails. It is a big job to make it effective. We researched a little bit of what the National Audit Office has said, looking at examples of good infrastructure projects in the rest of the UK. They found that, having the ability to bring in skills and expertise to operate a bit more flexibly as a project develops and changes over time through its project cycle and having a very high level of reporting to the Cabinet were all important factors for the success of projects like the Olympics. We had something similar with Commonwealth Games. You would say that those are events that might be different, but they were multi-year projects with a project cycle of development through to achieving benefits after the event. Another example would be Transport Scotland. That was created to deliver big transport projects for the very reasons that I laid out that you needed to have it separated from the day-to-day jobs of the civil servants. We think that the Warm Homes Bill provides an opportunity to create such a body. It could be similar to looking at international examples, something like the Danish energy agency, which fulfills many of those functions. I think that that is something that should be explored in depth over the next months, looking at the SEPE consultation responses and looking at options for how it could be delivered through an independent body. We have not given it a name. I think that that is something that could be explored, but we think that it would be well worth it. I very much agree that there is a need for an independent body that is out there, that is putting a lot of pressure on the civil servants who do not necessarily have the technical skills to be able to see this through and provide the oversight, but also on local authorities. Local authorities have a key strategic role in understanding their areas, but the level of technical skills and expertise that is expected of local authorities, especially in the cash-strap times, and where you transfer the housing away from a local authority, is putting a lot of pressures there. There are a lot of technical issues associated with furfishing both our housing stock and the non-domestic sector there as well. There is a need to ensure that we have the right standards set up, that we have got true understanding of the energy performance. We look at procurement, some of the contracts that have been proposed for Excel, that look at service contracts when we have actually building contracts. We have seen what happens if you do not have strong managing agents taking place with areas such as the schools in Edinburgh, where there was not the control of those PFI schemes. Quality is such a big issue. We have got to ensure that the standards are set there for quality, that the infrastructure is in place. There could be a lot of different methods of delivering, but setting those overall standards, we will need to ensure that. If we make mistakes and we really impact on the performance of our housing stock, we are going to be living with that for decades. What is that going to be as places to live and make your home in? If we have done things wrong within the non-domestic sector as well, it is going to be in millions of different places where we are making mistakes. We have got to ensure that we get things right. That can lead to us being too cautious at times. If we do not provide the right support mechanisms to put in place to ensure that we are not reinventing the wheel, that we are sharing best practice, that we are ensuring that we consider both the technological challenges and the people living there. That is the overall guidance that is required. It may well be that local authorities are involved in the actual delivering of it, but they need to be able to call on that level of support, or else we are setting people up to fail and we should not be doing that. Thinking about the idea of an independent delivery body, I think that it is worth pursuing that much further. In the case of a local authority such as ourselves with non-domestic building stock and so on, we have limited resources to be able to devote to energy management or energy efficiency projects. As I said earlier, they do compete with every other maintenance task that needs to be done with a school or a leisure centre. The idea of the delivery body would be independent of the political cycle. I felt in Fife's case that there was a very great reluctance to commit to budget prior to the recent election, because no councillors really wanted to risk it before their election and then you have only got, say, another four or five years, to have another election. The time scale of the grand project of reducing air emissions is way, way longer than any electoral cycle, let alone of any budget setting. Even if you had an independent political delivery body, you would still need quite a lot of local authority resources. For example, if every time we need to do any kind of projects, we must have asbestos reports, we must have drawings, we must have what is there already, somebody has to go and survey it. Very detailed things that we do whenever we do a project are the delivery body going to do that, or they may do a large amount of it, but they will still need our resources to be able to do it properly. The other thing that strikes me about the independent delivery body is that it would avoid the number of local authorities and the number of different bodies that are in Scotland, every one of them having their own little energy management team, some smaller ones, some bigger ones, but all taking a slightly different approach depending on the individuals involved in those particular teams. You would get a very much of a patchwork quill of effort. There would be a different amount of effort for each local authority, depending on the political nature of that particular local authority. In Fife Council's case, we have been very lucky, we have been driven from the top, which says that we will do this, but I can sense the change of direction, I can sense that we will do this except if it is going to impinge on our budgets for doing lots of other things that we need to do. I am getting a feeling that we are going to have less money to be able to do things, but we have a greater ambition to fulfil and we also have the hard-to-do projects. We have done the best projects and the best paying projects. If you had an independent delivery body, you would not have this great split of all different people trying to deliver this grand ambition in a slightly different way. The other thing about an independent delivery body—this is good and bad—is that when you get a different body that is doing it, you have maybe a lack of ownership, you have to be able to own the projects that need to be done. If you have too much distance, too many splits between delivering the project on the ground and who asks for the project, as you lose ownership of the project, you do not get so much buy-in for it, so you could get potentially more if you had an independent body, but you have to have enough strength for it to be able to do it. Thank you. I now have a question from John Mason. Thanks, convener. Following on from that previous line of thinking, if we are hoping to raise standards for buildings, the question is how we go about that. In particular, I suppose, for existing buildings. I am thinking both domestic and non-domestic. How do we do this? Do we impose regulations and say that every time a building is sold, it has got to meet the standard, be it a fine or a tax incentive or just that whole area of how do we take this forward? Not so much for where the public purse is paying the bills, but everybody else out there is domestic and non-domestic. Any thoughts on that? Yes. The alliance has long been a supporter of use of regulation to drive standards forward and to influence the market, to influence market transformation, so that we as a society value energy efficiency more. For example, that would be reflected in the property market. That is already starting to occur to some degree where you can get a premium for, say, an energy performance certificate A or B-rated property and you would get the opposite of a premium deficit for one that is an F or a G. That is starting to happen, but I think that regulation would really drive that. We welcome the consultation that is out at the moment on regulation of the private rented sector, because we know that that is a problem. The lower rated houses are where fuel poverty is concentrated. For that reason alone, we should be acting to drive up standards in the private rented sector, but we should also be applying standards to the owner-occupied sector at a point of sale, as you mentioned. I understand that the Government is planning to consult on standards in the owner-occupied sector in the winter, I believe, is its commitment. Again, we welcome that and we think that it is absolutely essential to create that demand that I mentioned earlier, the demand to make the seed programme a success. You have said that, when you mentioned the energy performance certificates, are they the best measure or are they fit for purpose? The energy performance certificate does have its issues, but we need to be clear about are we talking about the A to G scale. I think that the banding is something that is easily communicated, people understand it, they are used to it from its use with appliances, and it has been successful in other contexts at driving up standards and getting those worse-performing products to either move up or be off the market. The methodology that underpins the energy performance certificates, the standard assessment procedure that is used, does need improvement. We have made several recommendations in our response about how it should be improved to make it more accurate, to be more accurate in terms of how your house performs, but also what measures should be installed. It is about the theoretical energy performance of the building, and it is not about the actual energy performance of the building. It can be used for regulation, it is proposed to be used for the consultation on the private rented sector, and what the Government has suggested is adapting the assessment slightly so that it makes a more bespoke proposal of what is the pathway, the least cost pathway for you to meet the minimum standard. I can go into more detail. That is enough for now, but yes, it can be used, it needs improvements, and I think that those improvements can be made. That is probably the main point. You said that there was a premium that if people do invest in their property, they are getting a higher price. Does it actually match? If I spend £5,000 improving my house, will I get £5,000 more when I sell it, or how does that work? The most important thing is that regulation should be done in a way that you are better off, or at the very least, you are not worse off. A lot of the improvements that we are talking about to get up to a minimum standard of E or even to a D are very simple insulation measures, hot water tank jackets, loft insulation. It is not a big deal really, there are common sense measures where the payback is very good in two, three, four years time, and then it is money in your pocket after that. I cannot say how there have been various studies that have been done about how the property market is responding to the energy performance certificate ratings, but I cannot say exactly how that would work in Scotland against the standards that are proposed, but there is some research that could be done. I apologise to the other two because I focused there and misleitened, but I do not know if anyone has something else to say. I think that regulation is very much part of the suite of delivery. You have to have both your carrots and your stick, because I do not think that if there is not regulation, we are not going to hit a significant proportion, and often those people, to check that it is correct that we are addressing those areas first, since those are often the worst properties. In terms of what will be the financial impact, once you have regulation and people have to sort the problems out, there will be a decrease in property values, because you will know that you will have to sort the worst. Currently, if you need to put in a damp proof course or something like that, mortgage lenders with whole funds will be reflected in the price when regulation comes along. I think that we have to start looking at the owner-occupier sector, because there are such changes there and encouraging people to think about their homes as somewhere that they have to invest in, not just about putting in new kitchens and bathrooms, but making them homes that are going to be fit to live in throughout the lifetime of the occupants. Regulation is an important part of that. Building regulations in the new bills have made us improve the properties. Since so much of our housing and business stocks are going to be there long-term, we need regulation to make sure that it happens. Ms Archibald, is it exactly the same for the non-domestic sector? No, I would not say that it is. For schools, schools are not sold, they do not change hands. We have to have EPCs, but let me start by saying that EPC regulation drove us to make improvements. We had to find EPCs for all our non-domestic buildings over a certain flow of areas. We chose to get energy audit reports at the same time as the EPCs, because the surveyor would be on site and he would be able to write a report on what could be done to make improvements while he was there. As a result, we ended up with 279 energy audit reports. Out of that, we got 1,250 projects identified in those reports. Out of those, we found that 804 would pay back in less than 10 years. From that, we further investigated 616 projects. Out of that, we completed 306 projects. You get a rate of attrition. You start off looking at what is your overall stock. Where are you? What can you do? Regulations drove all that. Having said that, most of our property is in a G. We are talking nearly half of it, and that is nearly 200,000 metres squared of property being a G rated. If we take in F as well, that is 50 per cent of our non-domestic stock for which we have got energy performance certificates. If we take everything that we have got to E, that is nearly three quarters of our property. If we were to improve to nearly D, we would only have about a quarter of our stock that should meet the regulations. Three quarters of our buildings would be not conforming to a huge financial impact. It would strengthen your case when you are competing with the roof repairs that you were talking about earlier. Exactly. If you make something law, you make something happen. If you are talking asbestos regulations, or legionnaires' disease, or gas safety regulations, or anything along those lines, if it is the law, we have to find the money for it. The money has to be found. The question is, where is the money going to come from? It cannot necessarily come from the local authority because we are trying to keep the roof over the buildings. It could possibly come from Government, but that is taxpayers. I read through all the stuff and I noticed that the equity bonds or pension funds to me would be a very good way because we are talking about very long-term projects. You need very long-term investors. It is a bit like investing in forestry or something. You get your reward in 40 years' time. In the case of energy efficiency, it is going to be a long process to get your money back—a lot of money needed up front. To give you another scale of the task, if you take the 19 high schools, five of our high schools are electrically heated with underfloor heating. Underfloor heating is nearly 40 years old. It is like coming to the end of its life. We cannot build another five high schools and knock them down. It turns out that those five high schools are also six days built and not very well insulated. They are full of asbestos. One of them is electrically heated and full of asbestos enlisted. I think that we are raising more issues than getting answers. Seriously, we have a big scale. It is very helpful what you have been saying, but I will hand back to the convener. We will move on to a slightly different area. Gordon MacDonald has a question. Before we move on, I want to ask a quick question about non-domestic buildings from Janet Archibald. In your submission, you said that thousands of new buildings are using double the energy that they should because developers are massively overestimating their efficiency. You went on to say that we believe that there may also be a need for punitive measures to penalise developers and designers who deliberately overstate the future performance of a building. We are talking at the moment about trying to resolve the problems relating to existing stock, but do we have a major problem moving forward with new buildings that are putting up? How do we resolve that? I am not sure that it is deliberate overestimation. I think that you start with a theoretical model. You put in your drawing all the dimensions of your building. You attribute properties to all of the walls, floors and ceilings. You put in your systems. You do your very best to get the right answers out as to what the building will do and how it will perform. It is not necessarily deliberate that it does not then do that. We demolished one of our schools and built another school in its place. The school that we put up in its place is A-rated. It is A-plus. Its performance is not A-plus. It is not A-rated. It is really difficult. It is not necessarily deliberate if I can just find it here. I may not be able to find it, but it can take quite a long time to get a building to perform the way that you want it to perform. The first year will probably be about the same performance as the one that you knocked down. It takes maybe two or three years to get it more tuned into the way it should perform. Even then, it may never perform as well as a theoretical model. It takes a long time to calibrate those models and make sure that they match reality. That is a major problem, but it is not necessarily deliberate. I have the same task. When I am doing a project in a building, putting in new lighting or a cavity wall, I will do all the calculations in theory and I will come up with a saving. I will say, right, there is a cost saving. That is the payback. Will that actually happen in reality? It is very difficult to say if it will actually result. You will get exactly what you want in reality. You may not. It may not be anything deliberate. I just wanted to say that, witnesses, there may be things that we do not have time to cover in the session. If you want to submit further comment in writing and add a bit of detail, that would be helpful for the committee. However, if there are things like that, that is a way to deal with things. Perhaps Gordon MacDonald will come on to the further question. My question is about funding round-seeps. We know that, since 2008, there has been a substantial amount of investment into domestic housing and that 49 per cent of social housing is banned sear above, but only a third of private dwellings is at the required level. Given that the large proportion of housing is private housing and there is this lag behind social housing, what is needed to encourage private investment in that area to ensure that there is a greater take-up of home insulation and products? I will start on that. I think that that is just in those statistics of themselves that speak volumes about the value of regulation and the role that it can play. Since the social sector has been regulated, this is the result that they get. They have much higher quality homes than in the private sector. The same can happen in the private sector if we introduce regulation. I should say that a lot of that or the bulk of those improvements have been done through either the local authorities or the housing association providers, and the tenants themselves have been paying for those improvements. That has not been just all paid by the public sector. That has been paid by them. That brought that investment into the social sector. It is regulation again, and it is also about behaviours, because the social housing providers have worked quite hard with their tenants so that they understand how some of these new systems work and get the most out of them. They are winning the benefits as well as just getting the standard. You mentioned behaviour. We are aware that a saving can be made if people switch electricity users, but still a large proportion of people stick with the traditional electricity supplier that they have used for many, many years. Given that many households simply can't afford to make short-term expenditure for some kind of long-term saving, what has to be in place to try and encourage people to make those investments? Obviously, regulation is the backstop there for changing behaviours, but you have also got to look to see how you can facilitate people undertaking energy efficiency measures. It is a challenge getting any work done in your home, or for any business getting any work done. It is how can that be made easy for business. They have to be confident that they have something to say that they are the trusted traders that they can use. They often want to be able to call upon quality assurance to be able to assure the works that have been done. One of the major issues is some of the schemes that were run previously, particularly the ones funded under the energy company obligations. The level of quality assurance with one local authority has seen 50 per cent of the cavities that have notionally been filled. We have either not been filled, just holds drilled, or that they are only partially filled because we had unskilled tradesmen. We have got to look at skinning up our workforce because there are not sufficient people in Scotland trained up to do that. A lot of the traditional work people could adapt their skills to do that, but there are just not enough joiners, plasterers or the like to undertake that task. We have got to look at having the skills there. We have got to get that community engagement involvement. Some of the regeneration that has taken place when some of the area-based schemes, which have often been constituted more fuel-pull, you see the external cladding that has taken place, and the pride that people get in living those properties. External wall insulation is not appropriate for an awful lot of the stock, but it is appropriate for certain sectors. To make that happen, you have to organise that. It is a medium-sized building project that has got to be managed well, the quality assurance, and ensuring that the standards are met. It is quite interesting that you mentioned about switching. For a lot of people, money involved in switching can be good at one off, but to keep switching each year is only a relatively small amount of money. Switching on the hold does not make anybody use any less energy. Most people do not know how much energy they use. They do not know whether they find their fuel bill difficult to pay, but they do not know whether, compared to their neighbours or to other localities, I have a high fuel bill or a low fuel bill. They do not actually have that awareness. What support mechanisms and what behaviour change programmes do you have to put in so that you can start paying that attention? We have to look at reducing our carbon emissions to get people involved. How do we get that interest in doing that, which is a challenge? I think that full-area-based schemes have got a role. There could be things about one of the issues that we... There are not huge amounts of promotion, though we have some excellent programmes like Warm Home Scotland. The demand is so high that we are not promoting that to the full extent that we should be doing. If we promoted it and so many people knew it was there, you would not be able to meet the demand with the budgets that are currently available. There is a lot of things that can be interesting if you look to promote it, but you have to think about how you fund it. Grants are applicable for those who need it, but there is a need for loan finance to make that easier, for people to have other facilities there. How do you get the mortgage industry in the future? We have a very well-established lending market for the way in. Businesses is a big challenge as well, because they make such short-term decision-making. Businesses often make much shorter-term decision-making paths that they are not prepared to invest in anything that does not give them a six-month return. You will need regulation to make the businesses consider that. You talked about external cladding in relation to flats and tenements. What role do you think the council should have? I am aware in Edinburgh that, in relation to repairs, the council steps back from intervening if there is at least one private tenant in the building and leaves it up to the combination of tenants and owner occupiers to try and make that arrangement, which, given the extent of the problem that we have with external cladding and the nature of the job, would make it quite difficult for an individual to try and organise. What should the role of local authorities be in that? The local authorities have a strategic role that they have to play. If we are going to be having those programmes, which is a sep delivery, there needs to be there to be able to ensure that they are supporting the programme there. One of the things about sep is that they do envisage local authorities having a key role. It is going to be impossible for just getting people without an external body to organise themselves to carry out work that is done. In Edinburgh, some of the middle-class areas are sorting out their roofing problems, but it is very challenging if you have to try and get 10 people to agree to carry out some works. There has to be a facilitation there. It could be done by the local authority, so you have to start looking at the 10-month act and the warm homes bill that is coming along. How can you make that happen? In Glasgow, you are in a different situation. You have factors there. There are some disadvantages of that, but there are people taking a lead in that. You cannot expect things in a multi-oniobocariate bill to happen without some sort of external party to facilitate it. Just getting back to the funding question, the equity loan scheme that was introduced recently, is that going to provide all the necessary funding to encourage people to make these improvements? The equity loan scheme is one of several offers that are on the table at the moment. We did welcome that that was provided because it is good for people that may not have the cash or to pay for the upfront capital for measures. We think that that is going to have to be the case with this mixture of carrots and sticks. You will need a range of incentives, some providing loans to cover the upfront costs, some perhaps incentives, tax incentives, that are rebates that are paid after the measures are completed to suit people's different circumstances or how they like to want to pay for those measures. However, we have called for that in the design of SEAP that we should be evaluating the many years of experience that we have with loan schemes starting back with the home renewables loan several years ago. To my knowledge, there has not been a review of what the Energy and Saving Trust has delivered on behalf of the Scottish Government. There has not been a comprehensive look at what has worked, why, what are the particularly successful triggers, how have they been marketed, why have people not followed through once they have made an enquiry? All those questions would be so valuable in designing those incentives going forward. Thank you. We will move now to a question from Bill Bowman. Thank you, convener. If I can move to the area of advice and information that is available for the various consumers and perhaps some of this has been touched on slightly before, because I think that you mentioned that the Government currently has advice available through the Home Energy Scotland Resource Efficient Scotland. It has been recognised by the Government that, before their consultation, there needs to be effective advice and information mechanisms available to consumers and whether it is individuals or businesses to make informed decisions about the energy efficiency and supply in the future. They also consider that there would be a value in having a trusted source of advice so that awareness could be raised about what is available. Do you think that the energy strategy and the SEP consultations adequately address the need for a meaningful public engagement and effective behaviour change? Behavior change is something that we have asked about before, because there has been a slight feeling that you can do your models, you can work out the outcomes, you can decide if you want to change a variable. However, when it comes down to persuading people that they have to throw away their gas boiler or you are going to penalise them if they want to sell their house or stop them selling their house, how do you get people like that on site in a practical way? It is a big challenge. People are time poor often. They have other priorities in their life, something that so many areas we are looking at—how do you balance out those priorities? A lot of the things we have are quite challenging. If you ask people to go around a room, how do you adjust your heating system? The majority of people have a vague idea about how to do it, but they are not very certain about what to do. That is one of the difficulties. We have a mirad of things that we get given a little manual that I cannot find my glasses to ever read. You have to find better ways of engaging people. If you look about behavioural change science, one of the programmes that we have been running is not just telling people that people do not want just information, but they need to be supported into undertaking their exercise. They need to try to say that you could try an experiment to adjust your radiators. You can change it back again. Why do not you today do it? It does take time and resources. Sometimes it is much easier to think that we are just going to slap some materials on the outside of a building, but it is people who have got to engage it. You look at the issues about how you work in an office. You have got the people who like it hot, people who like it cold, all those sorts of things, but you can carry out exercises to get people involved in engaging it. How do they have that—can sometimes involve moving people around—but it is actually accepting that they do not have the information to know that this office is quite warm. It is 22 degrees, which is a very acceptable change, but I am just feeling a bit cold. Perhaps you need to put a card in it, but you have to have those engagement programmes put in place, developed and supported for the implementation to take place. It will require resources for that to take place, but most people do not want to be actually wasting money. If you were to reduce the arguments in an office place about the temperature of buildings, you would actually probably increase work productivity. There are so many people who have issues there. How can you do that? We are looking at sort of settling within change works. We are having those exercises. There are a lot of things that you have had within recycling, say, in the Parliament. A lot of work has gone into that to make you actually change your behaviours. There is a science there, there are people who are specialists in there, and it is a programme that has got to be supported. I think that there is work that can be done to provide that that investment takes place. You then start talking about sort of the wider provision of advice. I think that a lot of the time we are focused on providing information, and information is different from providing advice. You can provide people with a lot of information, but you then have to provide guidance about what are your circumstances. This may well be the best route for you to do, and be prepared to move beyond the provision of information. We have also got to look to see that people are getting information and advice and support in different ways. Yes, there are a lot of people who like engaging still on the telephone, but a lot of the people, in particular the high energy users, are not people who are going to ring up a helpline to find out it. They want to be able to do things digitally to find resources to actually take place. We have got to look to see how our systems evolve. We must not leave people behind. There are people who still need in-depth and face-to-face support and things, but there is a spectrum of support that is required. I think that it is support to take action and not trust the provision of information. If I can add to that. I think that part of this will be about engaging the wider public businesses, as people in their workplace, but also in their homes, with the vision for 2050. How marvellous is that going to be when we are living in zero-carbon homes, when we have virtually very small energy bills, when we are actually generating electricity power from our homes? We have to engage people with that very exciting, very positive, very desirable vision. If any of you have ever been in a passive house and experienced the comfort and have been told, oh, we don't pay any energy bills, and my house never loses any temperature overnight or I've been away for the weekend and it's still just as warm as it was when I left. That is the future that we should be aspiring to and is the vision and the strategy, so it's engaging everyone with that vision. That is number one, so that people want that. They're knocking the door saying, how can I have it? I want that. Then you can provide the advice and it needs to be, as Theresa was saying, it needs to be people-centred. It can't be a measures-based programme. It can't be a knock on the door saying, we've got solid wall insulation for you. You said, well, actually that wasn't what I was interested in. I want to have a warmer, more comfortable home with affordable bills, and so tailored solutions. Again, it's more of an upfront investment, but I think we know that that's how we're going to get the results in the longer term if people are engaged, if they feel they're getting good quality, fair, independent advice, and there are these enabling measures put into it. Make it easy for people. Make it easy for them to do it voluntarily. Make it easy for them to comply with regulation. It shouldn't be seen as a penalty. This is all about helping you to save energy. I would like to give you some context. I was involved in one of the SEAP projects, which was a business centre in Dumfirmland. I needed to put in some sensors so that we could monitor how well a project was going to go for their particular business centre, where we were trying to adjust them from having electric heating to biomass heating. I had to engage various business owners through the centre. A podiatrist wasn't all that interested. He wanted to go from one appointment to the next appointment, and he didn't want to spend any time with me, but I managed to put the stuff in. Another guy was very similar. The picture-framer guy was really, really not interested in speaking to me at all. I started to put the measure in, and something went wrong with his computer. He blamed me and ripped everything out, and I had to leave hastily. Then I saw him chatting away with another business owner over a fag, and he was talking about how stupid women had come round. Oh, my goodness. It's awful. If you've got a business owner who's time poor, they're not really interested in energy efficiency. They're interested in whether they can pay their bills and get their business to work. In the second context, I come home each day, and three days out of five, I have a message on my answer phone trying to replace my gas boiler or sell me some kind of energy efficiency thing, and they tell me that it's part of the green deal, and every day, I am not interested. Even though I'm actually an energy engineer, we need to have people buy in and not be sold. They don't want the hard sell. Nobody wants the hard sell. Nobody wants something on their answer phone. You have to have buy in. We had a campaign locally where we tried to get people to engage in buying a piece of land for a community ownership. They had a community engagement in the church hall. That did work. People did arrive. People did talk about it. I think that you have to have face to face. You have to have people voting with their feet and coming along, getting people to come along and buy in. Nobody wants a hard sell. That's my comment. The other thing is, in the fife context, we're not in a city, so we don't have lots of neighbours nearby, so we can't have a tight little district heating scheme or a campus-based thing. Neither are we in the remote sticks where we're off-grid and it's very expensive alternative energy. We've got low gas prices. We have to make our schemes stack up with very low cheap energy. For us to save energy, we're already not paying huge amounts of energy for on a gas system, so you have to think about it in that context as well. Thank you. I think that what you're saying is that we're talking the top, but we're not yet walking the walk on behaviour change. And a brief follow-up from Dean Lockhart. Thank you, convener. Just to follow up on behavioural change in education, given that today's school leavers by 2030 will hopefully be home occupiers or home owners, what role does formal education play in this? Is there a possibility that we can start educating kids who are about to leave school or at some point about this, so that when they are in the future, they can even talk to their parents perhaps, in the future they are in a position that they fully understand some of these issues? In school, energy education with young children. I see it as a very, very long-term energy efficiency project. You're going to pay the money now to do that, but you're not going to get the effect for 20 years or so before they can grow up and actually buy an energy efficient home. So it is a good thing, but it competes against every other kind of energy efficiency project that we could do. Interesting thought on that and linking it to the discussion about regulation earlier, that these young people will be renters, most likely. At the moment, I'd say that they have very little agency in being able to say to get a more energy efficiency property to rent. Probably they're going to end up in a quite poor energy efficiency property and it's hard for them to find out the information. Now energy performance certificate ratings will be included in tenant information packs, but they often feel because they're short-term rentals or there aren't many properties available, then they're not exactly shopping around. So this is where regulation can actually tie in with if they have increased knowledge and they can be asking questions and actually demanding that, well, you're not up to standard and that's my right to have a more energy efficient property. And so I think working with, like, say, National Union of Students and others to raise their awareness, as well as bodies like Shelter and others, so that when regulation comes in, it's actually enforced and makes a difference, will be very important. I will now move to a question from Gillian Martin. I want to come back to something that's been touched on by a couple of you around about the questioning, particularly from Richard Leonard about jobs and the opportunities for job creation and economic development. It seems to be two things that come out for me that this is going to be a massive undertaking to achieve the goals set out. There's great potential for job creation and great potential for existing companies to take advantage of the work that's out there, but you also mentioned that we've got a skills shortage already. I'd just like to open that up further and get your views on that. What should we be doing now to ensure that companies can take advantage of the opportunities out there and what should we be doing now in terms of upskilling our workforce to be able to carry out all this work? I think that we've currently got two models of delivery of energy efficiency programmes in the domestic sector, one being the area-based schemes where you're going through large-scale procurement which are very short-term, individual contracts there, and there are actually only four companies that bid for these contracts that are large enough to do so, prepared to take the risk of taking on a short-term contract. They do struggle to get the staff to do that, there's a lot of subcontracting to take place, there's a lot of skills workforce coming from different parts of Europe to deliver that. On the fuel poverty programme on Warmerhomes Scotland, as delivered by Warmworks, we've got a seven-year contract there with very clear guidelines set about the need to ensure that you're getting that wider community benefit there. There you've got 30 local subcontractors working from Shetland down to the borders delivering the programme. You've got certainty that it's worthwhile that the smaller companies getting involved in that delivery because it is a long-term contract for them. They are going to be taking on apprentices to be able to deliver that. There's a certain amount of work that's coming through. It's the stop-and-start nature of the short-term funding that's been associated with a lot of the initial programme that is preventing new players coming to the market or the existing companies actually training up and moving into the market and making it worthwhile. You've also got to look at the terms of procurement as well. There's a very big difference if you have the huge contracts, you'll only get very big companies who can go through the framework. If you start looking at delivering things on a much smaller scale, and yes, you need to have suitable standards in place and ensuring value for money, but there are different frameworks that can be developed, particularly if the contractual arrangement is not between the public sector—it's different for someone at schools—but if you've got small, non-domestic firms or the private housing and an individual company, then you can have different frameworks set up there to ensure that you've got the quality control, the comfort that's provided for the consumer, but you don't necessarily have to have the huge contractual framework. One of the issues is that because the contractual framework that it goes there, you actually can't ensure that a lot of the services, the standards that you acquire, are part of that. It's thinking about the procurement framework, the length of funding that's taking place, but despite that you've got to have the people you're going to be skilling up to actually work in that area. You're both looking about what is the role of the local colleges, what is the place of both its young people leaving school, but also people retraining as well, and that has got to be more focused on that tying the two together. How can you actually develop those skills? Because when you are working in existing stock, there will be a role for technological fixes and that you will find better ways to do it, so you can have some off-site works taking place that you can just try and ship in, but you do have to have those skilled crafts people doing the work often in sight because you've got to adjust the sizes of things as well, but you've got to be prepared to have that long-term investment, so people say that it is a career there and the investment takes place, and that combination of the colleges and procurement and the companies there and making sure that the local companies are interested, but most of them are not sure to work, so if anything is seen as difficult to work in, they will go and look elsewhere. Just to add to that that I think the other elements, if you ask industry what they need is one, it's the certainty that there will be the resources, the budget for the programme, and also the target. What are we trying to achieve by in 20 years and the milestones along the way, so they know what's going to be expected of them as an industry. Alongside the certainty is, as Theresa was saying, a skills development strategy, and I'd say another role for the independent body to work with industry on that. My last point is to say, we've been talking about Seat for two years. This was first announced, the national infrastructure priority in June 2015. It's May now. The consultation is just concluded, but one might say that that consultation, a lot of the questions that we're talking about, we could have had that conversation two years ago. That's an example of why we need to, you know, the skills development work could have started then. What are we waiting for? And hence again perhaps another rationale for that delivery body is to deliver the pace and scale that we need to achieve the ambitions. I think it's a demand that's there. The skills will follow if you create a programme of work, say in lighting or whatever, and you know that it's going to go on for a long period of time. The skills can be developed for that, but if you've only got one year, it's not long enough. We do have a direct labour organisation at Fife Council that has done a lot of my energy efficiency projects like lighting and so on, but the problem is that we have to have match funding as well for the Seat thing. We have to have match funding. The other thing is that we could use your newly developed non-domestic energy efficiency framework, which the Scottish Government has set up. My problem with that is that it's got to be £1 million upwards. I would prefer to have much smaller lots than that for doing energy efficiency work, and if it was very much smaller lots, you could get much smaller companies and they would go into it. We've already touched on a bit during the discussion about the important role that local authorities would have in delivering seats. I'm just wondering about what your views are on these area-based schemes and how they stack up compared to those that are targeted at either sectors or tenures? We've got to cover all of Scotland, and if you start just looking at particular individual sectors, you're going to have to keep coming back to an area. You're likely to pick off the easy wins first, but if we've got to cover all of Scotland because energy is used throughout Scotland, actually having an area-based approach would do that. There are things that you want to learn from one sector to another sector if you're working with the hospitality industry, which is a very dispersed sector. There are things that you'll learn from one area that you will need to ensure that that best practice of working with the hospitality sector can be used in other areas. To get that interest to want to take part in something is going to be much more difficult if you're having a very dispersed nature. There could well be a combination of the two, because there are specific things that you're going to be doing, say, in what you have to do in hospitals is probably more transferable. We've got a limited number of hospitals actually looking to see how you deal with hospitals as a whole is probably going to make sense, but an awful lot of things. It's much smaller businesses, smaller areas there that you need to combine both the domestic and non-domestic, and it also allows your local contractors to be developed as well. Working in large projects in a hospital, it's likely to be the larger contractors. However, if you want to work within an area, you want to get those small contractors involved and that community bals, the community engagement that you will get through working in an area. However, there is the difficulty that if you're working in areas, if there's going to be a 15-year programme or 20-year programme, there'll be some areas you're not going to get to for 20 years. You've got to think, how do you deal with those people who are in fuel poverty who cannot wait for their homes to be made more energy efficient or have more efficient housing? There's got to be a national programme to deal with those who are almost in need. There will also be early adopters who you're going to want to encourage to take action as well. To cover all of Scotland, you need to have area-based ones, but you must ensure that you facilitate the different demographics of those most in fuel poverty that you deal with as their need arises, and also to support the early adopters. If ever you're going to do district heating, you've got to do it on an area-based as well. It won't work if you don't have everybody engaged by the domestic and the non-domestic in that. An area-based work, our asset management team have been going through our non-domestic portfolio looking for redundant buildings or buildings that are partially used. For example, in Cercodi, there might be quite a number of community centres, and it's a case of, well, do we need them all and could we close some? We are starting to look at things in an area-based for other types of activity, apart from energy efficiency. This is one of the things that I have problems with when I'm doing energy efficiency work, which is not in schools. I have to work out whether we're going to keep the building or not. Is it going to be retained before we improve it? Now a question from Jackie Baillie. I'm increasingly persuaded by the argument for a national body, but I do want to explore with you where responsibilities should lie and the balance between local and national responsibility, because it's all very well for national government to set targets and leave it to local government to deliver against those responsibilities. Is there a view that perhaps some local target setting would also be appropriate? I'm just keen to explore that with you. I'll take that one. What we see is that it's in a national body, but it's not doing all the work, obviously. There's a balance between the national and local delivery on the ground. With local targets, we think that there would be local target setting as is envisioned with the local heat and energy efficiency strategies. I would say that that will need to bring in the fuel poverty strategies that local authorities or local fuel poverty groups would be forming as well. But there needs to be some kind of oversight to make sure that those local targets add up across the piece to meet the national target, and that would be a role for your national body. At the same time, some local authorities will be able to deliver more than others, because some have more challenges, some have other opportunities where they can make greater progress faster, others that might take longer, and there should be allowed some flexibility for local approaches. Indeed, that would be advantage to have a bit of variety of approaches so that we can learn from those. Yes, the responsibility would be shared, but you would have a national body that would have oversight. I think that, as Theresa said earlier, it could actually take some of the load off of local authorities in terms of the standard setting, perhaps in terms of providing support on regulation, so that we have more consistent application of enforcement across the piece. Data collection, mapping, data sets could be shared and, therefore, save money for everyone. One of the concerns—if I can just pursue this point of setting up a different body or an arms-length body—is accountability to Parliament and the setting of budgets. I wonder whether you would comment on that, because I could see how it would work, but you are pushing a way to a distance that direct accountability. How would you lock that down? I think that there would have to be reporting and scrutiny arrangements set when it was established, and that is why we have suggested that it would be established through the warm homes bill. That would have regular reporting to Parliament, that it would be accountable to Parliament, but ultimately the target setting, the vision for seep, has to be at the ministerial level. The reporting aspect of it is very onerous for us, because we are not doing 100 homes here or whatever. We are doing individual buildings. The amount of bureaucracy involved in something like seep or any of the national schemes, I have to say how much it is going to cost, how much it is going to save, right up front, when those things are quite uncertain. I find that we start off with a great deal of uncertainty in the cost and the scope of any particular individual project in a building. We home in on it as we get closer and closer to implementing it. Even once we have implemented it, we sometimes find that there is a difference in cost between before when we started and we ordered the project to go ahead and when it is delivered. If we have rounds of reporting, it gets to be very bureaucratic, to the point that Fife Council might say, do we really want to go with seep at all? It is so top heavy with the number of layers of reporting. If it is going all the way up to Parliament, it is a lot to put on an individual like myself. It certainly was for the seep pathfinder projects. I have had to report to internal people within the council and external people as well, all for very small projects. What are really quite small projects in individual buildings? Finally, a question from Andy Wightman. The energy strategy also includes a goal of setting a target of 50 per cent of Scotland's all energy needs from heat and transport and electricity from renewable sources. That is not your specialist area, I do not think, but do you have any comment on how feasible that will be given that it is intended to achieve it in a little over 10 years by 2030? That is the existing homes alliance. We have supported the setting of that target in large part because it does talk about heat. We are no longer just talking about electricity. We think that we need to talk about heat. It is not something that we have really discussed today, but I think that it is one of the biggest challenges for seep and for the energy strategy, obviously, to deal with decarbonising of heat. I am not really commenting on the achievability across the board, but in terms of the domestic sector, yes, it is certainly very challenging, but at the same time I think that it is a direction that we have to go in if we are serious about addressing the climate change targets. It is equally important to make sure that when we are changing heat from fossil-fuelled heat to decarbonised heat, it is not more expensive that we are not increasing a fuel poverty problem. After all, we still have to pay for the heat. That is why we have called for more effort to be put on fabric efficiency in the early years of the seep programme. You are reducing the heat demand, so you do not have such a burden on creating even more decarbonised heat and you are reducing the costs. More of an effort, fabric and energy efficiency, as well as looking at heat pumps and really a focus on off-grid areas. I think that in the early years, it is something that we can do now. We know what the solutions are. There is a good track record, so let us get on with it. There certainly is. It is very ambitious the targets that are set there, but it could be achievable if the political will is there and you start having the regulatory requirements behind it as well. We saw that the gas network has been put in and installed retrofitted to all the housing and businesses there. The majority of properties are now 80 per cent of the domestic stock, is heated by gas, but they were not built with gas-central heating to a large extent. Lot of the systems that you have got in place already, you may have to change to have a, instead of having a gas boiler, you could, if you have a district heating system, you would have to have a heat exchanger. It could be done, but we do not have any of the mechanisms to make it happen at the moment. What is happening in district heating in Scotland is way behind what is happening in other parts of both Europe and England as well. It is not standard practice whenever you dig up the road that you are putting in heat pipes. You could be doing that. You could be insisting that new developments all have the, even if you are not initially going to be collecting them to a district heating system. At that time, if you built them there with the opportunity to have a heat network there, it would significantly reduce the cost there. There is a possibility that it might not be used, but the actual regret for not doing that is much less if you put it in whenever you are doing planning that infrastructure bond there. I think that there is a need to say that if you are confident that you need to decarbonise the heat network, you have got to think much more about district heating and what you have got to do. There may well be a role for hydrogen in some cases, particularly where you have got somewhere like Fife, where you have got a much more dispersed area, but a lot of our cities lead themselves ideally to having a district heating system. You have got much higher density housing in Scotland with the tenements and the flatted properties, so they could lead easily to putting a district heating system if we had both the political will and the regulation to actually make it happen. I would say that there is a new housing estate getting built next to my housing estate and there is no district heating pipes getting put in. If that was part of the regulation, that would make it much more simple to do. Having said that, we have got 41 educational establishments that have direct electric heating with no wet system, so we could not put them on to any kind of decarbonised system unless we could not do 41 in 10 years with the money that we have at the moment. Our team put in a bid for unfunded spending pressures known as we were going to try to get some of them done. They are all urgently needing done because they are completely at the end of their lives. Our bid was number one bid. It did not get financed because the councillors felt that other things were more pressing like social care for elderly people and provision for nurseries for under-threes and lots of other things that just needed to be done. We made the best possible case to get the money and we did not get the money. Now, under time pressures, we will finish matters up there with the unfunded spending pressures example that you have given. Thank you very much to our witnesses. I will suspend this session and we will reconvene at about 11 o'clock. Thank you very much. Welcome back everyone and welcome to our second panel of witnesses today. We have with us David Handley, who is the head of regulation at SGN. Welcome to you. If you are not good enough, who is the hydrogen project manager for the Scottish Cities Alliance. Welcome to you as well. Keith McLean, who is the chair of the UK ERC advisory board and Stuart Hazeldine, who is Professor of Carbon Caption Storage at the University of Edinburgh, so welcome to the two of you as well. I would like to start with a question about local heat and energy efficiency strategies. The question is first of all whether or not local authorities should be required to produce a heat and energy efficiency strategy and also whether or not this would be best done by individual local authorities or by local authorities in conjunction with each other and how that would work, so I'm wondering who would like to start off on that point. Keith McLean, if I just clarify, although I am the chair of the UK energy research centre, I'm speaking as an individual rather than representing that as an organisation to date. Local authorities have a key role to play in heat and energy efficiency strategies simply because of their local knowledge and their involvement in so much to do with housing, planning and building standards and other relevant elements. However, I don't think that they on their own are able to do what is necessary because so many of the solutions, particularly for decarbonising heat as opposed to energy efficiency, will require the provision of infrastructure, which is simply not in the gift of a local authority. Therefore, it makes it very difficult for local authority to put forward a strategy if it doesn't know whether it will have hydrogen in the gas pipes, if there will be hot water pipes for district heating or if indeed the electricity system is going to be reinforced to allow some of the electrification to take place. Therefore, they may play a key role, but it will be absolutely necessary for there to be input from these other bodies responsible for what are monopoly networks and monopoly-regulated networks. With regard to the co-ordination question that you raised implicitly, I do think that they need to work together because although there are local specificities in the individual strategies, it is essential that there is common learning from what others have done, that there is pooling of resources, which are always rather tight and that there are common standards and approaches that individuals and consumers can expect from local authority to local authority. Thank you, Fiona. Good enough. I can speak obviously on behalf of the cities. My colleagues will have different work streams that we are taking forward on behalf of the Government for the seven cities. I work predominantly on hydrogen, whereas another colleague works on the low-carbon agenda, and we have a number of different areas that we are concentrating on with the seven cities to bring about that collaboration, to share the knowledge, to engage with whoever we need to be engaging with, to carry out these projects to actually get that scale across the seven cities. That includes bringing about district heating strategies. Dundee have written theirs, and they would like to be able to go forward and write their own energy strategy for the city. I think that other cities feel exactly the same. If not, they cannot complete it now. At least they have something that is written there in black and white in a few years' time while they are actually doing what they are doing, and they have a focus as well. Stuart Hazeldine I think that the answer to this also depends on what you are trying to deliver. I see that you are trying to deliver two types of things in very simple terms. You are trying to deliver energy efficiency and lower-priced energy, which is what you have been talking about this morning, but you have also got to deliver zero carbon energy by 2050. That is a very different sort of question. I am concerned that if we do that on a local authority level, rather like Keith McLean was saying, you can easily end up with the wrong answer, because people are answering a question that they can see a local bottom-up vision to, being how do we install a heat network, let's say, in the buildings that we have control over, which may lead you to a wrong conclusion about where we are going to get our energy from, and where we are getting our energy from may rely on top-down solutions, national electrification or national hydrogen networks, which need a very different design process and a very different connectivity and co-operation between all of the local authorities across Scotland. I think that you have to be careful what question you ask, because that will determine what timescale and what answer you get. David Handley, thank you, and thank you for inviting me here to speak to you today. In similar, it gets common with a lot of the speakers beforehand. We see local authorities have a very important role here in terms of a very important central co-ordination function. They are the people who can really link in multiple groups and help to create those bottom-up plans. What we do not need to make sure, however, is that we have consistency across regions, because it is that consistency in terms of the regulation and it is that consistency in terms of the market structures, which helps to promote investment and bring about things at least cost. Thank you. I will move on to the second question from Dean Lockhart. Thank you, convener. There seems to be consensus that local authorities can play a vital and should play a vital role in those strategies. I ask two questions. First of all, whether local authorities have the necessary skills, resources and the relevant support to successfully measure and implement this strategy. The strategy sets out 12 key functions—I will not list them, I am sure that you are aware of them. Do you care to comment on whether you think that those 12 key functions are appropriate? Are there too many? Should more be added? Just an overall sense of whether or not those 12 functions are appropriate and relevant. I would like to come back in terms of the skills and resources question, because I think that this is something that we find particularly important in terms of working in partnership with the local authorities to make sure that we are able to deliver the skills and resources where they are shortcomings and to make sure that we are able to provide an effective sounding board. I think that this is particularly important when we are looking at some of the innovation projects and saying, how do we bring out innovation in a way that is flagged for those local authorities, their specific needs? I think that in terms of resourcing, most of the conversations that I have been part of or have heard would suggest that the resourcing levels are nowhere near where they would need to be in order to carry out all the different functions that are needed. Even if they were adequate resource, I do not think that it is sufficiently knowledgeable yet. That is a key characteristic, I am afraid, of the heat policy arena at the moment. It is one that was ignored for many years. There was often just a simple phrase in decarbonisation scenarios that will decarbonise heat and transport through electrification, tick job done, but in reality it is probably the most difficult area to address. Whether it is in academia, whether it is in organisations like local authorities, I do not think that there is yet the knowledge to be able to make the necessary decisions. That is something that we are going to have to build up, not only through education but also through practice. Some of the solutions that we are talking about, particularly hydrogen or heat pumps and even industry heating, we have very little experience of that. We have very little practical experience of applying it in Scotland and therefore we need to do appropriate pilots to gather that knowledge and experience before we can make any of the key decisions that need to be made in regard to the decarbonisation. I should say to our witnesses that there is no need to answer every question, but certainly feel free to come in and join the discussion on the individual questions as they are raised. I would like to come on now to a question from Ash Denham. Thank you, convener. We have a proposed new regulatory approach in order to find and promote district heating. I want to get the panel's views on what you think about the regulations, whether you think that the regulations are fair and whether you think that they strike the right balance between the idea of choice and compulsion. We are grasping at one particular aspect of the heat challenge, which is district heating, and district heating is not the right answer in every case. There are areas where it is a good solution but there are others where it probably is not. I would highlight in particular the link to energy efficiency. If we really do build new properties to a high standard, the heating requirement is so low that it does not justify the cost of district heating to actually provide it. You can do it with very simple means that do not have the same capital costs. Similarly, with district heating, there is a clear dilemma at the moment between the customer density that you need to make the economics work, but the most dense urban areas are the most difficult to put district heating in. I barely need to remind you here in Edinburgh of the chaos that was caused by digging up the streets for the limited exercise of putting in the tram network. Just imagine doing that right throughout the whole city or throughout all of the cities over a 20-year period. It is not just the costs but the non-cost factors that you need to think about. I think that where district heating is suitable and where, therefore, we need regulation to deal with it, the proposals that are made start to address some of the right points. Even there, it is important to recognise that there are different reasons for introducing regulation in the first place. Customer protection is really important at the supply end, but so is giving people access and wayleave rights to put in the pipes in the first place and to find ways of regulating the asset base, as it has done for other monopoly networks, in order to get the risks down and the cost of capital down as well. It goes some way to addressing some of those issues, but the key one that I do not think that there is an answer yet in Scotland or UK wide is the last one that you mentioned about compulsion, that if you are going to make district heating work, as the Danes have done, they are always given as the classic example, the Danes have regulations in place, which mean that you have to connect to it basically. I suppose that you can choose to heat your home electrically at a very high cost as an alternative, but you have to still pay the fixed costs of it. I do not think that we are quite in a position yet to tell people that they have to do it. Without that, I cannot see the economics working. We have to be careful about just applying this one size solution, so I agree that district heating is not automatically a good thing. Where you can link in other sources of wasted heat, then it can be helpful and efficient opportunity, but if you are just trying to replace dozens or tens and tens of individual boilers in people's houses, which are already very efficient, with an equally efficient central district heating system, I do not see any gain. There is no gain in carbon saving, there is no gain in efficiency and you have a huge infrastructure cost. What I never see with any of those is a pricing per household of what it is actually really going to cost. Maybe it is going to cost £10,000 a household, maybe it is going to cost £20,000 or £30,000 a household, but we need to work out where the correct value for money actions are rather than saying that this is what we are going to mandate nationally. The track record of district heating schemes around the UK seems to be patchy, so if they are well run by the monopoly owner, then yes, you can produce a saving for the incumbents in the property. If they are poorly run, the incumbents are stuck with that monopoly and they could end up playing double the price of what an ordinary heating system is. It is essential that it is going to be a regulated type of industry appropriate for the delivery that you are trying to do, whether it is individual buildings or small complexes or whatever. That regulated industry has to achieve its performance targets like everything else. I think that there is completely a building on the points about district heating being the right solution in specific areas. There are lots of other solutions as well, which we need to be promoting in terms of decarbonising heat. They also need to play a part. Where we are looking at district heating, the question that you raise about does the regulatory model that is proposed go far enough is something that potentially we need to create more of a structure around the regulatory model to ensure that both the consumers and the investors have confidence in it and are able to get the lowest cost of capital into it. That really does mean putting in a regulatory structure where you have confidence over a long-term period that bills are not going to vary unnecessarily, that the investors are going to be able to get their lowest cost of capital in and then potentially it can work very successfully. Where it comes to compulsion, then I would immediately be starting to become quite nervous because I do not know whether the public is with us yet and bringing the consumer alongside us in terms of trying to make something like this work is absolutely essential. Just in terms of the experience that I have had working with local authorities in the cities, also Aberdeen, they have their heat and power company and Dundee, Perth and Angus are trying to set up their own ESCO, etc. When they have put in district heating schemes, they have been very successful in social housing and these tenement blocks are 71 per cent more efficient. The problem is that some of the tenants have been so used to fuel poverty, particularly in Dundee, that they are terrified of using and it is all that education on that side too. But at least it is going somewhere, not saying that it is a panacea, but at least there is something that is really tackling a very difficult problem in fuel poverty. Another question from John Mason. Thanks, convener. Building on what Ash Denham has been asking about with district heating, I actually have the Commonwealth Games Village in my constituency, so they all moved in knowing that they were going to be part of a district heating system. It would be fair to say that there have been a number of teething problems, not least because there are different types of housing tenure and even the different housing associations do not charge the residents in the same kind of way, so it is quite complex. The whole area of risk in the consultation paper talks about design risk, construction risk, operational risk, demand market risk, performance risk, financial risk and regulatory risk. Just reading those is quite scary to start with. How can we manage all of these kind of risks, or are some of them more serious than others? Try and respond to that quickly. When I saw the list of risks, I had a similar response. They are all very real. All those risks are very important and they all need to be recognised. I think you can simplify it, however, by effectively categorising risk into what is the risk of construction and getting the project away, and then what is the risk of the operation and the long-term operational asset. By almost creating a regulatory framework, which addresses the long-term sort of asset management aspect, then people know what they are constructing and they know how to design the risk of construction accordingly. There are still barriers, et cetera, which need to be removed, but in my mind it is that distinction between the operational lifetime and putting the equipment in the ground. I think again that there is a question. This is not new to people in the energy industry. Those are the sorts of risks that are managed through gas supply, through electricity supply already. The question is what is the justification for introducing another asset class alongside gas, electricity, water and all the others that we have? What is the justification for adding a new class with a new set of risks, a new set of players? Where that makes sense, where those risks can be easily managed, then fine. I think that there are a lot of other risks associated with district heating, which, other than some of the new build, some of the retrofit in high-rise buildings or others, where there is perhaps a good economic justification for it. Going at it whole-scale and having all of the additional risk management to deal with is a question that needs to be addressed seriously. That is just because in Scotland we are relatively new at district heating. For example, things that come up in my area are we do not know what the maintenance costs are going to be, we do not know how long pieces of the plant are going to last, so we do not know when they will need to be replaced, but presumably those are the kind of questions that, over time, we will become more familiar with. Absolutely, but since all of them have already been answered for the gas network that serves about 80 per cent of the population at the moment, why would you introduce a new set of risks that we know less well in order to deal with that if there is an alternative solution to continue to use the gas network? This is the point that is increasingly being looked at, particularly in countries like the UK with a very strong gas network, whether it can be repurposed in the future to continue providing the role that it has done for decades now of providing the energy into our homes for individual heating solutions with gas boilers. If that can continue, then it is a way of avoiding a lot of disruption, a way of avoiding a lot of additional and new risk, which will always be more difficult to manage than the risks that we know. It is why, at a national level, it is really important that we understand quite clearly what the options for using hydrogen in place of natural gas are going to be before we start looking at mass conversion to district heating or electrification. The one point that I would really want to emphasise is that district heating is not low-carbon, it is not a low-carbon technology. If you have your district heating in Poland, it is very efficient but it is run by coal and it is very, very carbon intensive. Pretty much all of the major district heating schemes across Europe use fossil fuels because they are cheap enough. The district heating with low-carbon sources is even more expensive to do and we do not actually have the low-carbon sources to deal with it in the first place. There is another risk that it is not low-carbon. If decarbonisation is the task, then we have to be very clear where the decarbonised energy for district heating would actually come from in the first place. I want to back up that point. That builds on what we talked about at the beginning of this session, that you have the dual motives of low-cost, effective, efficient heat supply plus low-carbon. If you go ahead and develop many local heat centres throughout a city, which are all individually burning methane gas or even burning biomass, then you end up in a cul-de-sac around 2030 where you cannot decarbonise those very easily. If you want to have a longer-term vision, then you would start looking very seriously at decarbonising the gas supply and converting that to hydrogen, which can then entirely go to zero carbon effectively throughout the country rather than just reducing carbon by 20 or 30 per cent, which is what we are talking about with district heating. Effectively, in money terms, again, we have to think about the money, looking at hydrogen substitution for methane gas into the existing infrastructure could be three times or ten times cheaper than district heating. Miss Goodenough, I do not know if this is your area here as we are talking about hydrogen. I suppose my next question is how long do we need to wait until we can really make a decision on is it hydrogen, is it district heating? We are getting a lot of there could be or it might be or we are going to work out the costs but do we need to act? We have been waiting quite a while to be honest with you. Hydrogen has only just started to, you know, that new word around the place. Hydrogen has always been, oh no, no hydrogen. I do think it has a massive role to play but a lot of people have to be convinced about the costs of injecting hydrogen into the gas grid and some academics say great, some academics say absolutely no that you would need 43 per cent more hydrogen and all these sort of numbers are, you know, floating around but until we actually do the trial in Scotland which SGN are going to be undertaking we still need to do that trial to convince everybody. Leeds Citygate was ambitious and fantastic project but it left a lot of uncertainties around those final numbers and that's something that we really need to address. I am still convinced that it has a huge role to play if you're trying to decarbonise heat. A straight heating until we find out a bit more? No, I don't think so. I mean it's down to local authorities when they're trying to deal with fuel poverty etc. We're very slow to be honest with you to actually get and we're risk a verse at really doing really large scale projects. You know the stuff we're doing at the moment is really novel. We lack the funding, we lack the support to really get to start to really scale up, if I'm very honest. Thank you. Perhaps just a further brief comment from Professor Hazeldine then we'll move on to questions from Andy Wightman. I'm in favour of getting on with pilots as has been described because otherwise we'll never have any real knowledge about this and pilots can be at scales of tens of homes or a thousand dwellings. This doesn't stop you also in parallel because this is a multi-decade transition we're talking about. In parallel with that, yes, fit district heating in local authority tenements where that's appropriate, but what we have to bear in mind is we should be doing that with the point of view that we may be changing the energy source from methane to hydrogen in 10 or 15 or 20 years time. You want to build in that resilience and that opportunity to change into the future so we don't build our infrastructure expensively into a cul-de-sac. Consultation proposes local authorities to be given the power to zone for district heating and also powers as well to award exclusive concessions to develop and operate district heating schemes. Do you broadly agree that local authorities need that power to zone areas for district heating and our exclusive concessions as a way forward for the construction and operation of district heating? In terms of zoning and concessions, I think it's certainly zoning, whether you need, as we alluded to, there's a critical role of local authorities in terms of co-ordination and certainly zoning potentially helps to progress towards that level of co-ordination creates a clear signal around that. I think the question in terms of concessions though is then in terms of actually what do we mean by a concession because concession can mean a multitude of things from a fully regulated model through to a very light touch concession and I suspect if we're looking more at the sort of established robust regulation then I suspect it could be potentially quite useful in terms of promoting district heating. I think the key thing then is then making sure that you've got co-ordination in terms of the concessions so that you don't have a sort of multitude of patchwork approach of concessionary sort of structures across the whole area. Any other thoughts? Again, is this the same point that you'd need to understand the reasoning for the zoning and is while we're still considering how we approach electrification and repurposing of the gas grids you would want to be sure that you are going for low regrets zones that it made sense to do that anyway and there are good reasons for district heating because it is an efficient way of producing and distributing and storing heat for use so where you've got that then it makes sense to have a model within that zone as to how the developer and operator will be given the opportunity to tender for that and then to have some sort of concession in order to build and then run the system but I think we need to confine that in the first instance to these clear low regrets areas where it makes sense to do it anyway. I hear that very clear message I think. I don't know if you've got any thoughts as well on the proposal to create a Government-owned energy company and whether that might have a role in the delivery of district heating. I'm afraid that I'm not familiar enough with the details because I think that a Government-owned energy company can be either on the supply side or it can be a vertically integrated company. I'm not sufficiently clear in terms of exactly what the proposal is to understand which of those structures is being proposed. There aren't many that aren't much detail at the moment. I'm just wondering from experience with other countries for example whether what this is a very large transition that has to be made over a number of decades and therefore Government has a big big role to play whether there are any examples of Government playing a kind of leadership transition role. Maybe not in district heating maybe in other aspects of the energy transition. I think that it's worth remembering that nearly all of our energy infrastructure was built in the public sector. We've done remarkably little in the private sector that hasn't been predetermined by legislation or regulation and that's still the case. I think that there are some very clear questions as to certainly whether in order for markets to play their best role they need clarity of purpose and if clarity of purpose is given by a Government body tendering for what needs to be done perhaps to get it built and then once it's built tendering again so that that asset can be operated then I think that that can work quite well and it gets over the design and the construction risk that is often priced in very expensively in the cost of capital. I think that for that reason it should definitely be explored but it should be done on the basis that it still will be the private sector that delivers rather than that we build up a massive state-owned and run organisation that builds and runs everything at the end of the day. Getting the cost of capital down the most clear examples of that that have been calculated have been with regard to nuclear projects where they believe that doing it in that sort of way can get the cost of capital down from about 12 per cent which is where Hinkley Point C is to about 3 per cent which should be the normal rate that would be applied to a Government project and that makes a massive massive difference to the overall cost. I personally think that the role of a Government company in Scotland let's say would be the design and the architect of the system to give that long-term overview of planning and confident and also multi-decade confidence that it's worthwhile engaging with this because we're serious about doing this over a number of years and it's really in that master planning of where you want where you want to build pipes where you want to build try and build those first where you want to build wires where you want to build those first do you want to have a massive rollout of district heating early on or do you want to wait and see a bit longer which is what I think we're counselling at this end of the table and but not to do the actual delivery the actual boots on the ground turning spanners welding the beams are done by private enterprise and that has to be contracted through that system architect and at the moment in the UK I don't think we've got a very strong system architect role at all it's laid off from the Westminster Government to national grid or laid off to off-gem or always laid off to somebody else who denies real overarching responsibility for it and that's not going to change our infrastructure very easily. Thank you and now a question from Richard Leonard. Thanks, convener. The watchword has been decarbonisation but one of the other threads running through the energy strategy is decentralisation and I just wonder whether you've got a view about the extent to which that applies whether I mean presumably some of the support that lies behind the keenness on district heating projects is precisely that localised decentralised delivery mechanism so I guess my first question is just to get your views on that whether you think that the energy strategy strikes the right balance between a more centralised approach and a decentralised delivery. The point of central versus decentral in my book looking at the model that we have at the moment in the vast majority of homes where we have an individual boiler we have probably one of the most decentralised heat production systems in the world and district heating is actually a process of decentralising rather than decentralising and it's one of the reasons why it's always important when we're looking at energy debates to make sure that we don't dominate the concepts with what we do around electricity which has tended to be what's been the case in the last 10, 15 years. Heat is very very different, it is very very local by its nature and ultimately it will be heat in our home which is what we're looking for, it will be hot water, it will be cooking and all those things at an individual building or an individual residence level so I think it's very difficult therefore to say whether central or local makes sense because ultimately we want it locally in our home, we don't want a heat source on the top of Arthur's seat that we can all warm our hands on from a distance so I think the centralisation of the solution though to perhaps a bit more serious about it, electrification and decarbonised gas are a much more centrally determined solution, you can't have somebody choosing to have hydrogen in one house in the street and somebody else having methane and somebody else having biogas in the others and if we are going to make significant infrastructure investments either in electrification or in repurposing the gas grids those are going to be much more national in their character but even district heating as I said before you need a source of low carbon heat for it that may well be electricity, that may well be hydrogen but equally as with the new project in Glasgow it might be taking heat out of the river Clyde with a heat pump and so I think that we need to keep a very open mind as to whether the best solution is a central or a local one and that you know there isn't a single silver bullet and therefore there isn't a single answer to what is best for a particular area. Can I just understand a bit and maybe Stuart Hyslidine can answer this? You said that you were cautioning or you were counselling caution at that end of the table and I think we all get that message felt loud and clear but is that a reaction against an action in other words are you saying well just let's take this steadier she goes rather than leaping headlong into putting all our resources into district heating for example I mean in other words will you see in all likelihood a role for district heating it's just maybe not as big as some people are estimating it to be at the moment much more the second from my own point of view so I think it's premature to make any of these big decisions because we don't we've only engaged with the problem on heat seriously really for a few years in Scotland so district heating we've had examples where individual buildings or small groups of buildings can benefit from district heating and that's those are going ahead to be developed so it's a low hanging fruit analogy rather than the geographic swathing through analogy and so yes let those thousand flowers bloom so the regulation and the policy and the approach should permit those to pop up and emerge where local knowledge and local enthusiasm might permit that to happen but I also strongly support Keith's point that the provision of the basic energy vectors is often and even usually going to be still centrally provided so there's still going to be even if we've still going to be a need for centralised or a grid of electricity so even if everybody has some solar panels on their house they want electricity at night even if people might like to have wind power they still want electricity in February when the wind doesn't blow those are going to require national backup systems and national infrastructure systems if we choose to change our biggest heat delivery system being methane gas supplying 80% of dwellings if we choose to keep that as methane gas we will miss our carbon targets so you're in a stuck situation there in 2030 if you choose to change that delivery of methane to all electricity you need to have absolutely unfeasible numbers of renewable build which we have no idea of how to deliver at all or if we choose to repurpose that into hydrogen then it's very difficult to envisage or impossible to envisage producing that hydrogen at cheap cost locally you will have 10 or 20 hydrogen production facilities around Scotland producing that hydrogen to send through the pipes which is a national infrastructure role so it's a mix of horses for courses quickly i think it's very important to recognise that we've already got a very established well sort of developed network in place which is running at sort of low cost and as part of the irons replacement programme where we're going through and replacing all the iron pipe certainly at the sort of more local level we're replacing those with PPEs of the plastic pipes which in it sort of helps to then create the sort of hydrogen economy and enables further grasses to be transported through those pipes so it's important to make sure that we're using the assets that we've got available because that helps us to deliver that decarbonised heat at least cost could i make one more comment just on the timing the the carbon intensity of heat production at the moment is relatively low because we burn gas quite efficiently the carbon intensity of heating in most people's homes is about half the UK electricity level which means that we have to bring down the carbon intensity in other sectors for quite some time before the heat sector becomes the limiting factor that gives us the advantage that we have a little bit more time to find optimal solutions for the heat sector and why we should properly wait for SGN and others to complete the tests that they're going to be doing so that we have the full practical experience of things like hydrogen to actually base our decisions on and certainly at a UK level most of the thoughts that from the climate change committee for the period of heat decarbonisation it is the 30s and the 40s rather than the 20s because in the 20s a we need to be preparing and b there are other greater priorities in the power sector and in the transport sector where we can make more substantial gains so i think there are some questions about the timing and i think that particularly the timing in the energy strategy for the targets of 2032 i think could prove you know i think that they're ambitious and laudable for being ambitious but my worry would be that they could be horrendously expensive if we rush into them without having done the preparatory work and actually before it's probably necessary in order to get on that 2050 trajectory. Professor Hayes Aldin this is just really for the record rather than what we're talking about today is because in the climate change plan in Scotland i think we've not recognised the connection between making hydrogen available for heating networks and the possible connection of hydrogen availability for transport where we've also got another problem because one will enable the other as well and so the energy modelling needs to ask a specific question of how does that connect and how does that reduce the cost of entry and the cost of roll-out of a network for hydrogenating transport with fuel cell vehicles which could be much more effective and less cost than electrification of vehicles where we're currently headed so again we've run the risk of deciding too early and going down a cul-de-sac. I wonder whether i could pursue this just a little bit further because politics is all about timing so i'm curious to know from SGN when you anticipate that these trials will be complete and when we'll get a sense if if actually replacing methane gas with hydrogen is is a real impossibility because i hear what you say about 30s and 40s for implementation but when will we know because big infrastructure projects take quite a bit of planning? Absolutely and i think this builds on a point which was made earlier in the sense that we are decarbonisation of heat is a significant challenge which hasn't been fully addressed yet so we're at the beginning of this curve in terms of the sort of hydrogen projects that are currently underway currently that's looking at a feasibility study which is likely to take a couple of years that's going to be identifying the next sites which will then and i can provide precise timings to you on this but will provide sort of effectively a demonstration plant hopefully sort of three to four years after that once the feasibility is being completed. I think one thing which is very important to not to lose sight of is that there's the pilot studies themselves but then there's also the surrounding safety case and a lot of what the work that we did in terms of a pilot project over in Oban in terms of opening up the gas market was looking at what are the gas safety regulations for broadening out the bandwidth for allowing different gases to go through those sorts of changes take time to go through and make sure that everybody's comfortable with that and we shouldn't lose sight of that because that's a very important part of the story as well. I think we would be interested in further detailed information on that. The other thing to remember about hydrogen is it's not that new up until the 60s 50% of the gas that was in our gas networks was hydrogen. Town gas was a strange mixture but as I say about half of it was hydrogen and the rest was a mixture of hydrocarbons and carbon monoxide which is why it was so effective with your head in the oven as a means of ending it all. Just to build on that whilst absolutely supporting Scottish gas networks in the safety culture and that's absolutely essential then I'm also interested that this is not necessarily all or nothing in that the gas network could, much of the gas network seems to be rated for 10% hydrogen because historically up to about 10 or 15 years ago that was allowed to have that content of hydrogen so you could as a academic speculation spike if you like insert 10% hydrogen into our existing gas delivery without any adverse consequences. Obviously SGN will advise us on how tractable that is but you can start to do this and I could buy in effectively a hydrogen generating plant with carbon capture and storage which is operating, there are several examples already operating worldwide, this is known technology, I could drop that into St Fergus, generate hydrogen, feed that into the grid, take away the carbon dioxide and that could be operating in 2022 from my perspective, I've not done this with SGN so anything they say about safety I will totally concede to but I'm just giving you an illustration that we can get on with large scale pilots and gain more information so I don't want to wait but I'd rather want to progress at the appropriate pilot scale. Okay that's very interesting sorry. Just to echo that point I think there is absolutely agree that there is a lot of work which we can be getting on with in terms of increasing the blend over the next sort of four or five years absolutely we're not clear yet in terms of where the absolute limits are in terms of the safety case but I think it's fair to say that we've got a fair amount to go for there in terms of decarbonising gas which should keep us busy for at least the next five years. National Grid have already started trials of injection on an isolated university campus at Keel University, they will be operating with the sort of blend that Stuart is talking about and that's already underway. There's also an opportunity in the slap bang in the middle of Dundee City there's a very large national grid stroke SGN own site that's been like that for the last 20 years and it couldn't be for residential or anything else it really needs another brown it's a really brownfield site that is ideal for carrying out this sort of testing that we'd like to do which would be integrated energy system because obviously I've really concentrated on the transport side because you need the demand and buses take the demand and then we decarbonise in our city sensors so there's a massive opportunity there that we could work together on that. Equally I'm still continuing to work with our European partners, we are now undertaking some very large-scale projects, very ambitious projects across Europe in terms of putting in hydrogen infrastructure and fuel cell buses and fleets and there's another incentive now underway about working with cities and regions about how do we actually start to really commercialise hydrogen technology right across all the sectors and that is something that I'm taking forward with the cities. I'm hoping they will sign the MOUs and then we will work as a working group to take forward that so together with Europe and international partners we we could really start to make a big change in Scotland. Aberdeen has already has the largest fleet of hydrogen buses in Europe. I know I think committee have taken evidence on this before, can I turn to the questions I was supposed to ask you which is slightly different Obviously there are likely to be opportunities but also challenges as well for existing industrial plant that generates waste heat and I wondered whether you saw any possibility of them connecting to say whether it's a district heating network or other heating network. Clearly it's possible and a lot of the heat mapping that's been done for Scotland has identified sources of waste heat. The difficulty there is just how sustainable is that going to be. Where is that heat coming from at the moment? It's probably coming from burning fossil fuels so will that actually be able to continue and there's also the other big problem when I used to be with SSE back in the 1990s we were developing combined heat and power plants and the big issue there was that the industries like the paper industry that we were heavily involved with at the time unfortunately in the 2000s went bust and suddenly there was no heat anymore and so you've got to think if I've got a big source of heat what am I going to do? A if it breaks down so where's the backup going to come from and B what happens if it goes long term out of business or if it converts to something else? So I think particularly with the pressure on decarbonisation at the moment you would need to really be clear that you were making a worthwhile investment in the heat networks to to utilise that heat and that it was going to be available or some alternative was going to be available because these heat networks a lot of the economies on them work over 40-50 years just like the pipes and the cables in the rest of the industry so if that's not the sort of sustainability in the long term then it's questionable whether that extra investment's worthwhile. I get the impression from the earlier discussion that we need some form of regulation in relation to district heating and one of the comments was about the patchy performance of the existing district heating schemes so we need some form of technical standards and in relation to the lifetime of these projects which you've indicated are quite long we need some form of consumer protection as well so given that is there any drawbacks or challenges that a licensing system might create and given the devolved settlement that we've got do we actually have the powers to introduce licensing? I think a correctly structured licence I think can address a lot of the challenges which you've identified because ultimately and this is something which we see in networks all the time is if you're linking sort of performance and returns through to outputs and incentivising sort of good delivery and ensuring that your customer satisfaction scores are there and the customer has knowledge and comfort in terms of what their bill is going to be and has visibility of what that bill is going to look like and knows that that's going to be done on a fair and equitable basis then that's a very strong structure through which to progress. In terms of the constitutional sort of whether the powers are there as sufficient I'm going to have to differ on that one I'm afraid certainly it has been noted by Ofgem that they don't currently have the remit to cover off into the district eating site and whether that's something which is going to change or not what sort of timetables it's going to change but there's clearly a there appears to be a gap at the moment. Okay we'll now go on to questions from Gillian Martin. I'm really interested in your views on how we are going to take the public with us and whatever that is that we decide to do because I'm in this committee and I'm confused. You know and there's a lot of choice out there and there's a lot of technical language around what we're talking about and your ordinary consumer is already got a situation where even they would even take advantage of things like the swapping of energy suppliers to the extent that we'd hoped I'd just really be interested to see what your views are and how we can take the public with us and whatever whatever we decide to do in the energy strategy. I think taking the customer with us is absolutely vital and it's an incredibly challenging thing to do because you've got multiple customers out there each one will respond to information in different ways and will find different things informative. I think what is clear is and this has sort of been mentioned before but sort of making sure that the customer doesn't go through unnecessary disruption and end up with a stranded asset is absolutely key to that so making the right or sort of making decisions at the time using the existing equipment sort of increasing the blends of decarbonised gas into the network etc so that the customer doesn't face a choice in my mind is probably sort of preferable and then whilst you then build out the district heating networks etc where consumers are able to move into that area and full knowledge of what they're sort of entering into rather than trying to bring about a substantial change in retrofitting a substantial change at a later stage and potentially imposing it. I have seen early public consultation events have to take place and education education all the way because it is very confusing whatever we decide to go for and you've got to have the public buying because otherwise it's an absolute disaster you know like when we brought the buses in to Aberdeen you know the mixed messages you know until we're out there constantly you know reassuring the public you know why we had these buses in Aberdeen and it's really vital we do that and we get very clear messages out why and what the benefits are to the public. What worked? It was engaging public consultations and going to the schools just reaffirming press statements out why we were doing this in Aberdeen because the press would jump on anything you do when you're using the public money and most of it was funded actually from Europe that wasn't the point. They liked to hang on the fact that the price of the bus and why weren't we pushing it into a school or into a hospital same old things and so then you'll have the operators will start to really back off because you know end of the day they're running those buses in live operations and then suddenly you've got the bus on the back of a low loader and it's stagecoach's logo all over it and when it starts to affect like that then you then have the private sector not wanting to work with you so that's just one very small example so it's really key that engagement with all the stakeholders is done very early before we even start and the trials go on before you even come up with that. It's going to be panacea, I think, by the end of the day, but the people are very informed of what we're doing. I think that we have to engage and inform people about what's happening. I think that there's a problem though in gaining acceptance for it because all of the solutions that we're looking at at the moment for decarbonising heat are more expensive than the natural gas solution that people have at the moment so we're already starting to climb up a hill rather than to ski comfortably down one which we've done in perhaps in the past. Nevertheless there are some interesting examples from the past about how we've made big changes like this and nearly all of them have had fairly clear regulation at the heart of them so the clean air act which effectively switched people from using coal to using alternative heating sources it was effectively a ban on coal for heating in cities. The change over from town gas to natural gas was decided upon, it was done, there was then a programme of change. We have had some very effective regulations for changing gas boilers to make them more energy efficient. We've had similar regulations for light bulbs and other things which have come in which people have not really ultimately had a choice about but apart from a few mones and groans the only difficulty now is that since these things were always blamed on Brussels, if we don't have Brussels to blame them on then we'll need to find somebody else to agree with all of that but it's a process of progressive nudging as what I'm hearing in all the time and it's a question of a strong government mission that we're going to be doing the right thing because it's better air quality it's a better environment we're more sustainable and we're able to charge more in some cases for taking away rubbish to landfill we now charge lots of money but clearly that's got public buy-in because people can see that it's the right thing to do and it's created lots of jobs and so these things also create jobs and business and wealth so it's a it's not an onerous hair shirt burden we carry it's about leadership it's about doing the right thing and it's about creating new types of jobs and new types of work and what's your response to that the previous panel was talking about the importance of having a particular body that's overseeing all of this because that strikes me as being a key way to engage the public as well? I think it's essential the scale of the task is so enormous over such a long period of time it has to be done in a way that is cross parliamentary, cross party and I also agree the skill set for such major programmes doesn't usually sit comfortably within the civil service and I agree with the examples of the Olympics or the common wealth games as being good examples where there was a very very clear set of objectives and the delivery was managed independently but very effectively I think in both cases certainly we weren't late which wasn't really an option in either of those but other big infrastructure projects we've managed successfully but they have to be done independently of government looking at 2050 we've got one chance at putting in any network because it will still be there in 2050 two chances at putting in generation like gas or wind or solar maybe three goes at boilers and end users but in that time we'll have five price controls seven UK parliaments and 35 UK energy ministers that's the run rate at the moment so I don't believe that we have a governance system at the moment that is capable of making the key decisions and although the tenure in position in Scotland is much longer than it has been in Westminster there's still an awful lot of these things that will be dependent on that so I think between the UK government and the Scottish government we need to put a governance system in place which will be long term independent and capable of delivering the massive programmes thank you and I think follow-up from Bill Bowman I thank you convener I think actually Gillian Martin has probably covered most of the things I was going to ask about in terms of engagement and changing behaviour what you seem to be saying is that that's a very important aspect and it has to start as soon as possible but we need to know where we're going before we start passing a message out or we get into one of your cul-de-sacs I think you referred to earlier just because the sat nav today says that's the best route it's maybe not based on the correct information so given the the timescales we have I mean how stretchy are they going to have to be do you think to to be realistic they need to be stretchy as I said for heat we need to recognise that in order to get into a 20-year delivery programme we need to prepare we can't say right we'll we need to start in the 2030s so we'll make the decision in December 2029 we need to prepare the path but it is eminently doable we've shown with major changes like the move from natural gas to natural gas from town gas that we're capable of that we've shown through major energy efficiency programmes that we've been able to get the run rate of measures at the right sort of level UK wide we're talking about 20 years 20 year programmes with converting about 20 000 properties a week so pro rate that for Scotland that's 2000 properties a week in Scotland over a 2025 year programme that we need to be decarbonising it's challenging but it's eminently doable as long as we prepare the way and make sure everything's in place for it to start which date were you talking about though the 2030 date yeah at the moment I think that the the we can be entirely consistent with climate change targets by rolling out the decarbonisation of homes following also the energy efficiency programmes and so on that we were talking about which can be started beforehand in that sort of timescale if we can start in 2025 in Scotland even better but I don't think that there's a false that there's a need to impose an overly challenging timescale as I said before because otherwise the the cost challenge will just become too difficult yeah so just as perhaps slightly disagree the objective for me is 2050 to have very very low carbon across scotland and I think we'd probably all agree on that and working backwards 2030 is or 2032 is just another milestone 2025 is another milestone here we are in 2017 and we've actually already started we've been doing this for five or 10 years so we're not about to start we're partway through we're finding that the problem is we've done some of the easy easier parts the problem becoming more complicated more interactive across horizontally if you like as well as the pathway we're going so we need that better long-term security of governance which will also help us inform to do the pilots to do the experiments so we can make the final decisions of some other things in 2025 we'll be making final decisions on yet more things in 2030 but it's that preparation along along the journey which is the I think Keith was also talking about so none of these intermediate dates matter in the sense of the final destination but we've got to tick them off progressively and we don't quite know which order they'll be ticked off with yet because we're still doing the work certainly and the 2032 target is absolutely challenging and I think he's absolutely right that it should be challenging because I think as an industry we need to have challenging targets to respond to them now I think that's by having that sort of challenge then that helps focus minds it helps focus attention in terms of addressing saying right how do we go about addressing these challenges but we shouldn't underestimate just how challenging that will be to get that full percentage so is it a chicken and egg situation or an inside out puzzle situation I don't know that it's I think we are starting we can see a path to to getting there I think that the Scottish government's commitment to the seat programme and the sort of recognition of the monies that are going to be necessary within that has been a very good start I agree I put I led the work across government and with the expert groups that put together the recommendations that turned into seat and my report was finished in January 2015 so I agree with one of the previous witnesses that it's a shame that we're still taking quite some time to get there but nonetheless I think it is a very strong commitment and I think that if you like that was the chicken or that was the egg we've got that and we now just need to build on that and put the necessary plans in place I think they're doable as long as there is the commitment and clearly as long as the funding does materialise for it right well thank you very much to all of our witnesses I'll suspend the session and we'll move into private session thank you very much