 Rhaid開始ch, dros cyfrodiadau a gfników. Wel bleeding daddy. I gweld y d murmwch bidu massive Derbypowder ac yn gtw actingedd eich sgwrn allwaith lot eich ganiac i Cabinetarな Marwyr今日 mewn môr. Mae'n mynd i'ch wych anтиagramau i'u cyhoedd ar bod yn amhiliadno cursedur y scirffod ddim yn defnyddaf i chi weld llawer yn llGER iickingu cynio yn dwyniol hefyd. Talking to 절�hearted weekend. We have apologies to this morning from Patrick Harvey as he is running late. He should be of our witnesses, Felix White, who is running late, that should be with us shortly, too. Item 1 on agenda, can I ask your members our content that we take item 4, our discussion on our work programme in private? I agree. That's great, thank you. Item 2, can I ask your members our content that we consider a draft report on future prospects for oil and gas in Scotland in private future meetings? I agree. We are agreed. Thank you very much. Item 3 on the agenda, we are going to take some evidence this morning on the future of renewable energy in Scotland. I think probably before I come to introduce that, I think quite helpful, we just went round the table and said who we all were and why we were here. So I'll start. I'm Murdo Fraser. I'm the convener of the committee and I'm the Conservative MSP for Mid Scotland and Fife and I'll hand over to Dennis Robertson. Good morning, I'm Dennis Robertson, I'm the deputy convener of the committee and I'm the SNP member for Aberdeenshire West. Good morning, everyone. I'm Neil Stewart, the chief executive of Scottish Renewables, which is the representative voice for the sector in Scotland. Good morning, I'm Tric Brody, I'm a regionalist at MSP for the south of Scotland. Good morning, John Forster, chair of STA Scotland. That's Solar Trade Association, also on the board of STA for the UK, also in a business forster group, which is actually a range of businesses, one of which is a large solar installer here in Scotland. Gordon MacDonald, MSP for Edinburgh Pentlands. Good morning, I'm Mark Winskell, I'm a research fellow in energy innovation at the University of Edinburgh and I also work for the UK Energy Research Centre. Good morning, I'm Rachel Earl, MSP for Central Region. I'm Keith Bell, I'm from the University of Strathclyde, where I occupied Scottish Power of Chair in Smart Grids, and like Mark, I'm also involved in the UK Energy Research Centre. Lewis MacDonald, Labour MSP for North East Scotland. Tony Mackay, Energy Economist based in Inverness. Joanne Lamont, Labour and Co-op MSP for Glasgow Public. Joan MacNaughton, I chair some work for the World Energy Council on the energy trilema, and I'm on various other academic boards dealing with energy and climate policy, essentially. Joanne McAlpine, MSP for the south of Scotland. Hello, good morning, I'm Angus MacRown, chief editor of Bloomberg New Energy Finance. We're a business of about 200 people who crunch all the numbers and analyse in some depth all the trends in clean energy and the energy transition worldwide. We're also joined by the official reporters who are noting down everything you say. I'll also read to the senior researcher on spice on the energy policy and by our committee clerks who are here to keep me right. And I'd just like to welcome Felix White, who's just joining us from Community Energy Scotland, so welcome. So we're going to run this as a kind of round table format. I think we're going to run it for about 90 minutes or so, so we'll try and finish by about 11.30, because the committee does have other business to discuss this morning. As it's a round table, I want to keep it as free-flowing a discussion as we can. I urge everyone to make their points as briefly as they can, that would be very helpful. If people want to contribute, it'd be helpful if you just caught my eye and I'll bring you in as best I can, as time allows. I'm particularly useful if you either agree vehemently or even more usefully disagree vehemently with a point that you just heard made. I'll catch my eye and I'll bring you in and allow you to contribute, and that way we'll get through the topics in the time available. I just want to start by setting the scene a bit as to why we're here. As we know, there's been a change in UK Government since last May. A Conservative Government elected with a manifesto pledge to end subsidies for onshore wind, or at least new projects for onshore wind. The renewable obligation will close from April 2016 but with grace periods in place, which you might have views on. There's a current consultation on controlling subsidies for solar PV and the feed-in tariff, which you might have views on. We had a speech last month from Amber Rudd, the Secretary of State at DEC. The bill is a reset speech setting out the direction of UK Government policy. A lot of discussion on that with a focus on offshore wind. Discussion on the future of marine energy. I noticed from Mr McKay's written submission that he had some comments about the future of marine energy and that might be of interest. We're also interested in talking about issues about not just renewable electricity, but renewable heat, where there have been some Treasury announcements. The Treasury, according to the latest edition of renewable energy news, expects their managed expenditure on environmental levies, including renewable obligations, contracts for difference and feed-in tariffs, to double from £6.2 billion—more than double from £6.2 billion in 2015-16 to £13.8 billion in 2020-21. The Treasury, as we know, is concerned about overall costs in the sector. On top of all that, we've got the Scottish Government's budget, which is due out a week today, which you might have a view on. We have Scottish Parliament elections in May next year, which might have an impact. There are a lot of things happening and a lot of moving parts in the equation. I thought that it might be quite useful, maybe as a starter, just to go round the witnesses—maybe I'll just start with Neil Stewart on this side and work the way round—and just ask you all, just for a couple of minutes, set the scene, tell us what you think, where the sector is, what the major challenges are and what you're looking for going forward. If you try and do that fairly, succinctly that would be very helpful. I'll start with Neil Stewart. Thank you, convener. I think that I would echo some of the points that we've made in our written evidence. The last decade has really been a success in terms of the very significant growth of renewables, particularly renewable power, but also significant growth in renewable heat and transport, although we probably are behind the target in both of those areas. That's really been down to supportive policies here at Holyrood and also at Westminster, but I would say that the cuts to various schemes that you referred to already, closures to various support schemes and delays in terms of timescales for the next allocation process for contracts for difference means that the sector is in many ways in disarray at the moment. I think that all those sudden changes have not been good for the people and companies who work in the sector and we're seeing people leaving the sector and they've not been good for companies and communities that want to invest in new projects. I think that some ways that the tragedy in all of this, I would highlight two things. One is that to some extent it really stalls the momentum that the sector has made over the last decade. For example, in terms of pretty significant reductions in cost, both in onshore wind and offshore wind, for example, and also significant cost reduction seen in solar. The very sudden changes actually threaten progress on all of that. The most important thing is that the very sudden changes and the impact that they're having on the sector in many ways run counter to the UK Government's overall ambitions in terms of climate change and their very often stated commitment to decarbonising the energy sector and the economy at the lowest cost to consumer. We think that things like just removing all support for onshore wind, for example, and for solar very much run counter to that given that those are the lowest cost forms, not just of renewables but of low carbon power that we can deploy at scale. I think that those are the problems in terms of what we need for the future to get the industry looking forward again rather than looking backwards. I think it's some sense of ambition of what both the UK Government and the Scottish Government see as the role for renewables, not just out to 2020 and our 2020 targets, which have really been the focus till now, but what is the sense of ambitions for renewables beyond 2020, out to 2030, potentially even out to 2050, the role for renewables in the key overall challenge of decarbonising the energy sector and decarbonising the economy. Right now, the industry, to a greater or less extent, is feeling its way in the dark as to what the overall ambitions for the sector are into the future. I congratulate the Scottish Government's commitment to the 2020 target of 100 per cent renewables. Since we set up STA Scotland back in March, although STA Scotland has been around in the UK since 1978, the support from the team of the Scottish Government and the relevant teams has been very good. However, the reality is that solar in particular is an under-deployed technology in Scotland. We are heading rapidly towards nine gigawatts of solar in the UK. It would be logical to think therefore that we would be approaching 900 megawatts of solar in Scotland, and, in reality, by the end of this year, we will be lucky if we are getting past the 200 megawatts mark. We are a long way off the mark. On the other hand, we have a huge amount of wind, which has been incredibly successful. The trouble with that is that, if we are looking for a solution to renewables providing a long-term solution to our overall power needs, we have to deal with the intermittency issue. Well-proven now is the fact that wind and solar work well together, but with over five gigawatts of wind, we should have around about two and a half gigawatts of solar by now if we were to achieve some sort of balance. That combined with storage would be producing something akin to baseload or along those lines. That is an important difference to understand. Of course, solar will be, and as I have mentioned, solar and wind are the two lowest-cost solar technologies. Solar, in reality, will be the first subsidy-free technology, a solar trade association. We reckon that that is around about 19 or 2020. It may come closer, depending on the actions of the industry, on the back of the cuts, but it will be undoubtedly, without any doubt whatsoever, the first subsidy-free technology. It is also the technology that is closer to the consumer and the end-user. That is important for things such as fuel poverty and cost reduction. It is important to say that this is not just about generation numbers, although, ultimately, with a target of 100 per cent electricity generated by renewables, it is all about top-level and how many gigawatts you have. However, you have to bring it down to a user level. Whether that is fuel poverty, of which we have a major issue and a major opportunity for solar in Scotland, or whether that is cost reduction in things such as industry where solar can play a huge role, the potential is enormous. It also links well with other technological solutions. Things such as storage, which we will hear about, the way energy is used, consumed, the links in with transport and moving to more electrically-based transport. All works well. There is a more electrically-based economy and, obviously, solar fits well into that at a user level. It also has great local and long-term employment opportunities as opposed to some of the short-term employment opportunities that tend to go with some of the larger hits that you get from deployment. It is also technology that, in all of that, has the potential to move very much from the carrot scenario where we have had big subsidies supporting big deployment to that low subsidy or subsidy free scenario where either it will pay for itself or, alternatively, as we have seen with the October 15 new building standards coming out, we see a massive uptake in solar coming up over the next few years on the back of those new building standards because solar PV happens to be the best, cheapest and most accessible solution for the new build industry in Scotland. That does not bring out big numbers. By 2020, we reckon that that will probably be around about 72 megawatts of deployment per annum on about 24,000 new homes, assuming that we can achieve the build standards targets that have been quoted. However, the huge potential—commercial rooftop alone at the scale that it is at—if you look at the Scottish commercial rooftop, the size of that potential could deliver the entire remaining balance of our 50 per cent of our renewable electricity that we are trying to get from renewables. That is how significant the opportunity is. That is done at a consumer level, which is self-phenominal. It is probably time for a strategy rethink when you look at what we have done to date with this heavy weighting towards wind and the real missed opportunity for solar. I do not blame that necessarily on any one party. I think that there are lots of players in that. It is about getting the deployment mix right. I think that it is about bridging the gap. Is there an opportunity for a Scottish feed and tariff in RHO? The costs of solar to get it to subsidy free now are tiny in comparison to other solutions, let alone when you talk about the nuclear option. You start getting down to marginal income, marginal cost, a little bit of support financially or a little bit of cost reduction, because grid connection, for example, could be reduced or planning costs could be reduced. Those are the little things that will bring about that parity or subsidy free solar opportunity sooner rather than later, which is a big part to play. Thank you very much, John. You slightly stretched my definition of two minutes, but I will forgive you that for now. I agree with Neil's comment that, in many ways, the last 10 years have been a success story. There has been broad political consensus, which has been very important at the UK level. We have seen very significant changes to the energy system during that period, so we have had a very considerable renewables expansion. We have had significant falls in energy demands, some of it policy-driven during that period, and we have had the significant decarbonisation of energy supply. I think that looking for signs of continued commitment to that, Amber Red declared in her speech that the Climate Change Act was a good model, and she also suggested that the carbon price would need to escalate. I think that there is still a political consensus at the UK level that the UK low-carbon transition is necessary, and we need to pursue that in the least cost method. However, there is obviously a lot of concerns in terms of practice and what we have seen in specific areas since May. There is a whole list of those. I do not know how far we want to get into those, but I think that alongside the renewables question, the issue of CCS and the withdrawal of £1 billion of demonstrator support funding has huge implications for the system transition, as articulated by RPP2, for example, and Scottish Government and fourth and fifth carbon budgets. I think that the whole statement by the UK Government now is the need for a hard reset, which means quite major changes to the current policy regime. I do not think that the evidence is necessarily suggesting that the hard reset is absolutely necessary. I think that we have seen quite significant benefits from the introduction of EMR. Contracts for Difference are proving to be an important mechanism for cost reduction in offshore wind and onshore wind. The prospect after one round is that it takes some time to bed in and that the investment community and everyone else associated in the industry need a period of learning around all policy measures. I think that the other thing that needs to be addressed is the extent to which gas is now seen as the preferred technology for investment in the 2020s. The latest deck revised energy projections to 2035 have quite a remarkable or significant amount of extra gas built into the level deployed, so there is an extra 12 gigawatts on the system by 2035 compared to last year's projections. That suggests that we are heading towards a much more gas-based system. That might be compatible with decarbonisation up to about 2030. After that, and into the 2030s and beyond, there are serious questions about what that gas is going to do to the emissions intensity on the electricity system, so that some of the problems that are being created at the moment will manifest in the longer term. There are obviously short-term implications as well in terms of meeting the renewables and engine directive targets, given that there is a little prospect of more onshore wind being supported. There are real concerns now about the delivery of policy targets specifically to 2020, but there are also real problems being stored up for the future after 2030. The danger of an outbreak of agreement on this half of the table so far. I would also say that the deployment of renewables has been very successful. I think that it still has a huge role to play. John is quite right to highlight the huge reduction in cost of solar PV. We see some issues down south of how that is being used and whether the system issues are quite being managed in the way that arguably they should be. I think that we have to recognise that the success of renewables and the reduction of cost, not just of solar PV but also of onshore wind and offshore wind, has partly been facilitated by the financial support that has been given to them. I think that it is quite right. One thing that I would agree with UK Government is that we should be seeing those costs continue to come down and we should be encouraging that direction. That is absolutely correct. However, if we try to look retrospectively, we have to accept that the reduction that we have seen so far has been partly because of the support that has been given. Could we turn the clock back and optimise the level of support? That is just not possible. What has happened is that the first rounds of contracts for difference auctions look like they are doing the right kinds of things in terms of bringing about further reductions in cost. We still need to see how much of that capacity is going to be delivered. As Neil, John and Mark have alluded to, quite what happens when the next rounds are going to be and what is going to be contracted for is a big open question. Mark has already mentioned this. The big challenges come after 2020. We have a lot of attention on whether we are going to meet the targets that have already been articulated, but decarbonisation of heat is a massive thing that we really need to take seriously. What John has said about the building stock and improvements and new standards is extremely important in that. The existing stock remains a challenge. The extent to which we decarbonise heat by electrifying it and making use of a decarbonised electricity system as distinct to other options is still to be resolved I think about the most cost-effective way of doing it. Other options open up about combined heat and power, provided that you are using renewable sources of power, district heating and so on. They all have massive capex implications. John mentioned the operability of the system, absolutely right. There are ways of doing it, but of course there is an engineer, I would say, but they might cost you. Absolutely the thing to do is to make sure that we minimise that cost. I think that the electricity supply industry maybe has been a bit slow in getting around to it, but I think that there are positive moves. I think that there are now serious attempts to address those issues. Of course storage, my final remark, has a big part to play. I do not think that we should forget that we have already been making massive use of storage. Coal stocks are a form of energy store. Gas store, what we have done in electricity, has been to make use of those stores at the right time, in the right way. That is what we have done for 50, 60 years. As we decarbonise quite rightly, we are going to lose the coal stocks. As Mark has said, going through into the 2030s, we ought to be losing the resource of calling upon gas, except in a small way, or perhaps allied with CCS. What we are left with is thermal storage, which remains cheap in comparison with batteries, but arguably we are not doing the best with it so far. Some members of the committee will know that I have had long-running arguments or disagreements with the Scottish Government over their energy policy, including regular arguments with my local MSP, who happens to be the minister. Electricity accounts for less than 20 per cent of energy consumption in Scotland. It is a relatively small producer of CO2 and other emissions. Oil, particularly road transport, is the biggest polluter. Gas, which is mainly used for domestic heating and cooking, is the second one. I cannot understand the Scottish Government's obsession with electricity, because we should be doing much more, particularly with road transport, to reduce pollution. Electric vehicles, alternative fuels, diesel and petrol are the same with houses, so we can make much bigger contributions to environmental policies and CO2 emissions by concentrating on road transport and to less extent housing. The second point that I would like to make as an economist is that the subsidies for onshore wind have been far too high. From some work that I have done recently, the rate of profit in onshore wind farms in Scotland is currently about 22 per cent, rate of return. The industry average is about 10 per cent and energy utilities like Scottish Power and SSC are happy to get 5 per cent or 6 per cent rates of return. The subsidies might have been justified to begin with in the early days, but for the past few years they have just been far too high. From an economic point of view, it is sensible not necessarily to eliminate them but to cut them radically. The third point that I would like to make, which I mentioned in my written submission, is that a lot of the R&D that Scottish Enterprise and Highlands Enterprise have put into the renewable energy industry, particularly for wave energy, has been badly used or misused. You probably know that both Palamys and Aquamarine Power have gone out of business. Scottish Enterprise has lost about £20 million on those two companies and Highlands Enterprise is about £15 million. It is very difficult to say, but I think that we could make much better use of the money, the public sector money that we are putting into renewable energy. You encouraged us to engage in violent disagreement. I think that decarbonisation of the electricity sector is absolutely crucial. It is crucial if we are going to succeed in improving the carbon emission performance of both transport and heat over the longer term. You do not have to do it with electricity, but electricity will probably end up being the right way to go over the longer term. Two points that I wanted to make on that. The first is that has already been partly alluded to by other colleagues, which is where are we going after 2020. We do need the vision and not just the vision in terms of the overall carbon budget but the road map of how we are going to get there, because, essentially, we are replacing a huge legacy capital stock, which has been built up over 100 years or more. In order to do that in a way that is as affordable as possible, we need to know where we are going to end up and how we are going to do it. That does not imply Government prescription of everything, but it implies some principles. It implies a view about where the cost attribution will fall for the future. That is highly relevant to judgments around which particular technologies are going to reach grid parity when. Actually, it would be wrong, as I think may be being contemplated south of the border now, to load on a lot of up-front costs to the early movers in the renewable sector for system impacts, but, equally, it would be wrong not to take account of the whole system costs of those renewables. That is going to be an extremely important area in the future. It is one that is not receiving a lot of attention at the moment. On affordability, in the work that I lead for the World Energy Council, the relative affordability ranking of the UK has deteriorated significantly over the past three years, and that is largely down to renewable support schemes. That does not mean that we do not engage in support for renewables. It does mean that we probably did not get the shape of all those support schemes right. What it means is that we have to be very careful in our decisions for the future that we decarbonise in the most affordable way. I agree with a lot of the comments that have been made about that, but I make one other, which is implied by the prospect of a new dash for gas. If it seems likely that the current complete reduction in investment in the oil and gas sector upstream results in a bounce back of oil and gas prices at some point in the future, which also seems likely given that we expect shale gas production to peak in the US in the mid-twenties, according to the international energy agency. If we make ourselves too dependent on gas, we are actually not optimising the affordability of the system. I think that a strong and healthy renewable sector is going to be a very valuable hedge against global wholesale movements in gas. I encourage us to explore, in rather more detail than I can in this brief introduction, some of the system implications and some of the crossovers with the gas strategy and how we execute the policy in a way that delivers what we are trying to deliver, which is security of supply at the best affordable cost while decarbonising the electricity sector and, indeed, our energy sector generally. I thank the convener and the committee for your generous sense of time in terms of two minutes. I wish that we had the same generous sense of time in achieving our carbon ambitions, alas I think we do not. As reflects our membership, I am really here today to focus on issues relating to the community energy sector in Scotland, which is a subset of the renewable energy sector as a whole and the impacts of the reset in Westminster. Looking at where we stand at the moment, Scotland certainly continues to lead in community energy in the UK. About a third of installed capacity is in the Western Isles alone, that is the whole of the United Kingdom. That reflects the scale of ambition and of Scottish communities, the opportunity that has been out there, but also the structure support from the Scottish Government. That is really what has made the same underlying support mechanisms in the UK play out very differently for Scotland. I think that leadership and that support that it continues is very important. The question we really face is what next? The 500 megawatt target for locally and community owned energy has been a very important signal, but we are now effectively meeting that target. So we would like to see a clear signal of continued ambition within Scotland, but it remains the case that the challenges that have been touched on by the speakers already in terms of the more drastic than expected changes to renewable obligation, feed-in tariff, climate change, levy, as well as the enterprise investment scheme, mean that I think just doing what we've done before won't be enough. As Mr Mackay has already said, we do need to be thinking about the integration of electricity with the wider energy system, particularly around transport and heat. Our view at community energy Scotland is that a greater focus on innovation and experimentation at the local level is one of the ways we can try and create a more integrated energy system through things like storage, local energy supply models and demand side management. These things are already happening in Scotland, they've already been supported, but I think that needs to become really a greater part of the mainstream and we need to redouble our efforts at this stage to build on what has been done so far, make sure that all that capacity, learning and skills in Scotland isn't lost and that we work together to ensure that the success to date in terms of the really significant amount of renewable energy that's been installed so far in the next phase becomes much more about local ownership control and participation in Scotland's renewable energy resources because I think it's not just a question of adding more numbers onto the system but making sure that renewables are the low cost and the profitable option for ordinary people and I'll be very happy to speak in more detail about some mechanisms for that as well as the impact of the UK subsidy cuts when we have more time. I thought I'd just start with a little bit of international flavour. 2015 will be by incisible margin a record year for both solar and wind investment installation in terms of gigawatts worldwide and it's also likely to be the first time that developing countries invest more in renewable energy excluding large hydro than developed economies so that's really quite exciting and all the time costs have been coming down but very very sharply in case of solar so more gradually in the case of wind. So if we look at the European context the UK has actually been a relatively sensible promoter of renewable energy over the last few years. The line of investment has been sort of gradually upsloping whereas if you look at countries like Spain, Italy and Germany they actually invested a hell of a lot in solar at a point at which solar was many times the the cost that it is now so they've got a sub legacy of having had those booms that they're really going to have to pay for in the future. In the case of the UK the cost of the renewable energy support to date even on the government's own figures which I'll come to in a minute translates into about half a cup of cappuccino per week per head of the population so it's not a lot of money to pay considering that we've raised the proportion of renewable energy generation from 6.7% in 2009 to 25% in the second quarter of 2015. I take the point that Tony made about there being too much fat in system I think that's probably correct but the CFD programme has shown that the auction systems can can bargain costs down pretty effectively and the first auction in that respect was very encouraging. And just on the UK government policy I think there are one or two shaky foundations there. One is they're very insistent on energy security but they're also emphasising gas in a big way and those two things look somewhat incompatible to me unless there's a domestic shale gas boom which we don't really see any sign of. They're also hung up on on the difference between baseload and intermittent which I think is has become increasingly simplistic as a notion has time gone on and thirdly there's a levy control framework or LCF which we've dubbed low credibility figure because there are several aspects of it that mean that you're only taking a very partial view of the overall costs. I'll mention just one which is the wholesale price effect so wind and solar are pushing, squashing down wholesale prices and the effect of that is that the computed subsidy then goes up, the lower the wholesale prices, the higher the computed subsidies is so they're almost kind of biting off their own tails and there should be a more sophisticated way of measuring the cost of support. It's right to measure the cost of support but should be done in a more sophisticated way. Okay, thank you very much. Well that's taken up more than a third of our time but I think it's been very useful in terms of setting the scene if we can have slightly sharper responses in future that would be quite helpful otherwise we'll never get through all the topics we want to cover. I'm keen to bring in some members, members have got questions so I want to start with Dennis Robertson and I think it'd be helpful to members rather than just throw open a question which you'll all want to answer and then we'll get three questions in the remaining time if we could maybe direct questions initially at one panel member and then we can if you want to come in and respond to something that somebody else has said, just catch my eye and we'll do that. Anyway, I'll start with Dennis Robertson. Thank you convener. A recent report from Ernst and Young has said that there's been a reduction in investor confidence but at a recent meeting of the energy and climate change committee in October Westminster Andrea Leedsom was saying that the UK remains an attractive place for investors which are sort of take on that. Ernst and Young, it's a decline in confidence or Andrea Leedsom we're still an attractive place for investors in renewables. Maybe Neil Stewart, good. So I think it's it's fairly unequivocal that the UK is a less attractive place to invest in renewables now than it was six months ago and again Ernst and Young have quantified that in their quarterly attractiveness index. To me it's not really, to me it's actually more fundamental than confidence. The reality is if schemes can make the renewables obligation deadlines as have been set out if you've pre-accredited for the feed-in tariff or the renewable heat incentive or you've been successful in bidding for a CFD there is a viable investment case for your project and you will be able, we think in almost all cases you will be able to access finance at a reasonable rate to take those projects forward. The converse of that is that if you're not able to make those schemes or do not have access to any of those schemes there's probably no business case for future investment in your projects and I was looking at some numbers from DEC this morning so for example the closure of the renewables obligation will leave something like 1.7 gigawatts of want your wind projects with effectively no route to market. To me it's not really about confidence, it's about whether or not you've got a viable investment case. If you have we think you will be able to access finance but there is a growing capacity of projects which simply don't have a business case for further investment. Policy decisions require the market to be either confident in the way forward in terms of stability and some of the policy decisions that are being made at UK at the moment or being in terms of the obligations that the subsidies brought forward in terms of the deadlines. I mean surely that in itself is playing a major part in investor confidence. So is those policy decisions which create that very binary situation where you either have an investment case for your project or you don't? Is this a sector specific? I noticed when Amber Rudd made her speech a month ago more or less, the response from Renewable UK to the announcements on offshore wind was very positive and said this set. In fact there's a quote from Mass Smith at Renewable UK saying that Rudd's speech provides clarity on where the Government stands on the future of offshore wind which will give developers the confidence to invest in the British economy. So is it certain sectors which are more or less affected by this? So I think different sectors in a different position. The sector states overall commitment was to a broad level of capacity by offshore wind through the 2020s but very clearly caveated around certain levels of cost reduction being achieved by the sector. So we think that's a fair bargain. However what we do not have is any sense of timings of future rounds of allocation. There's been significant delays already to allocation rounds for contracts for difference and what our members who are in the offshore wind sector are telling us is that those delays are increasingly damaging and it is vital that the first allocation round has taken place and has concluded by quarter four next year. But I think your question is the sector specific. I think there's an issue here around investment for all the power sector. So again the sector state highlighted in her speech that the current market framework is not delivering power not just in new renewables but will not deliver investment in new nuclear without significant support from government and credit guarantees but also we're not seeing any investment in new gas fired power generation at the moment and again it's very clearly committed the government to taking steps to increase subsidy support to gas fired generation in order to get new gas fired power into the system. Andrew Watkins, head of the energy and marine team at Caterer Jonas stated that the plans by the UK government to change its subsidies will kill off the solar and onshore wind industries in the UK from 2016 onwards. I'm just wondering what John thought about that. Well quite simply as it stands and I suppose it's easiest to use our recent jobs numbers that we had carried out. Ernestine Young produced their own numbers on this at the beginning that were very similar. Solar in the UK closing on 35,000 jobs we estimate adding in Ernestine Young figures I'd say were broadly similar so two different reports we estimate that those will fall by around 27,000. So in Scottish terms we think there are just under or we believe there are just under 3,000 jobs in solar in Scotland we see that falling by 2,400 jobs next year. I think the question I was going to ask John Foster and I'm quite concerned about that because I've got quite a number of solar jobs in my region especially in the Urdingston. At one point people thought that solar needs continuous sunshine, you see all the California etc. What do you think, is there going to be any more solar farms and would you agree with me and I think you said in an opening statement that my view is that whenever we're building a house now we should be putting solar on the roof. Do you agree that we're actually underestimating solar and we should be investing more and I'm concerned about the statement you've just made about jobs? Well in practical terms the solar farms then takes housing separately for example. Solar farms there are solar farms a number being built right now there's one being built between Dundee and Perth for example it's 14 megawatts so that will be the largest to date and there's another one going on up in Angus at about nine and a half and there are others in the pipeline so it's some bigger than that but the trouble is that's all activity through that will die next year and that will be the end of it. It's worth mentioning though that there is quite a lot of activity around post 2020 developed solar so that's large landowners in particular with developers looking at potential to build post 2020. Now that would reflect what I said earlier about solar being able to operate subsidy free beyond that period so that's clearly just backing up that estimate that subsidy free is looming for solar and as I said earlier it will be the first technology to do so. The situation around domestic or residential new build picking that example that happens to be that new building standards set out obviously by Scottish building standards have been expected for a period of time now have allowed the industry to work out what the best solution to meeting those building standards is and it just happens to be that solar PV is the renewable solution to reduce carbon levels in new build homes and because we have a now starting to boom housing industry and a big commitment towards new social housing obviously announced recently combine those two and what you get is a significant future for solar in particular within the new build sector. The difficulty with all these things is the time it takes you know that new build build out you know it will take a while to get to the level of volume that I touched on in my opening words I've just mentioned the the solar farm opportunity sort of post 2020 you know have an industry supporting nearly 3000 jobs just now in the interim there is little hope for those jobs there is no other opportunity and I'll talk about it in the wider sectors like wind there's no point in pretending those companies will be shutting down they are already shutting down manufacturers distributors associated parties yes of course you know we're in a growing economy now and there's opportunities in other areas many of those companies including our own will have other other businesses and other interests and other sectors and can redistribute those jobs but we're still talking about the we've created an infrastructure in Scotland and in the UK it's actually a sense of expertise for the world quite honestly you know it's well thought of the UK development industry across all technologies is well thought of and yet we're actually about to destroy it our consumers are going to spend the next 20 years paying for that investment not paying a great deal it's the cappuccino mentioned earlier on I think the last four years of feeding tariff solar in the UK we estimate have cost £1.33 per annum on the average consumers bill that doesn't seem like an awful lot of money you know 10 pence a month just over you know to support the solar industry for the last four years across the whole of the UK hasn't sounded to me like an overspend you know which is where they thought the LCF reference earlier on was so appropriate on solar just a couple of follow-ups and there's always one to come in specifically on the solar point we good to good to hear views but we have been here before John haven't we because I remember in 2011 we had all these predictions of devastation that which didn't come about are you are you just crying wolf again well the answers of course they did come about because the peak of that boom in solar there were over 8,000 insulation companies in the UK registered that has since fallen back to below 3,000 and what was interesting about that is germany had been through the same issue a few years earlier where it got to 55,000 insulation companies and then fell back to 8,500 because of a similar cutting so that this model is actually not unusual we've seen that this path trod before yes there was a 70 there's been a 70 reduction in cost in solar panels which is driven to a point where the lower levels of subsidy that happened overnight in 2011 the industry has managed to adjust but we're still talking about an industry that's half the size it was at the peak of 2011 unfortunately these cuts are going to be so much greater can I ask about something else because as caught my eye yesterday there was a recent ruling by the European Commission on import tariffs and Chinese solar panels which according to the solar trade association will have a detrimental impact can you say a little bit about the impact that will have indeed this is mip minimum import price effectively a chinese anti dumping tariff introduced in december 2013 we had it was expected to end at the end of 2015 it was scheduled to do so however an organisation called proson who represent the manufacturing bodies in Europe have appealed to the commissioner that it should be extended and the commissioner announced the announcement that you refer to was that he will now review that the trouble with that review is it will take 12 to 15 months and in that period the what was the expected reduction in costs that would have come on the back of this are not now going to happen to put a number on that solar power europe who represent all the trade bodies across europe for solar had estimated earlier this year that that would removal of mip would lead to reduction in panels to the tune of perhaps as much as 25 per cent based on global pricing so unfortunately one of the things as an industry we were hoping for was was that potential for a very significant fall in prices i think we expect falls in prices because the industry will undergo so much pressure but not good enough to make a big difference but presumably if we were in this committee taking evidence from the manufacturers in europe they'd be saying this is a great decision by the european commission yes not surprisingly angela marco has welcomed the decision but unfortunately across europe all the trade bodies who install have recognised that it is going to significantly depress installation definitely also have a point to want to make on solar particularly otherwise i'm happy to to hear other issues right lose my double yeah thanks very much our community i want to follow up a couple of the points that come out from the initial introductory comments one was around our community energy and the the impact of that on the recent changes and the prospects for that going forward i think felix white said that the the difference between or or the the essentially the funding mechanisms the sport mechanisms are the same across the uk the reason why scotland's been so successful in community energy is because of the way that's been applied and and the added value if you like of of scotland's government policies over a considerable period of time i wonder given what we're now looking at is potentially an end to new developments on both wind and solar at at community scale i wonder at what mechanisms or policy applications will make a difference to that in scotland now and over the next in particular the next two or three years and what can be done in order to ensure that the community energy model which has been so successful as you say in the western aisles is applied elsewhere in scotland well i think there's two two routes one is to the scotch government to continue to work with the uk government as it does particularly around community energy and one of the sort of faint hopes of of the government's current deliberations in response to the feeding tariff review is that there will be some additional safeguards or support for community energy schemes in particular under the feeding tariff and the the sector as a whole across the uk has made quite clear recommendations on that front practical recommendations about how support could be more targeted bearing in mind that the feeding tariff when it was originally introduced as a policy was meant to be for communities households and other non-energy professionals but but looking at where that money has gone about less than 1% of feeding tariff installations today have gone towards communities that's based on off-gems on figures so in our view there's quite strong grounds for saying whatever budget is remaining that should be more targeted in line with original policy objectives in terms of what can we do within scotland it's clearly quite challenging but i think that the areas of opportunity are around innovation in energy storage supply and demand side management and there are levers that the scotch government has to help support those kinds of projects it's stuff that's happening across the uk i'm sure Keith could talk about projects you know happening elsewhere it's part of an ecosystem but there is a particular focus in scotland on what we can do to link the skills the capacity of community organisations that have developed renewable projects or want to develop renewable projects to look on the other side of the fence at energy supply distribution storage and management and that's not just electricity but here in transport as well so i think there's an existing scheme for example called the local energy challenge fund that supported a number of schemes and we hope that it will continue i think it is a smaller toolbox in the uk as a whole we can't do it i think without some alignment and continued support from uk energy policy but that's why i would see the opportunities within scotland yeah i think i think some of what's starting to emerge from the discussion just in the last few minutes has been some of the links not just of the energy system with the wider economy you know we talked about jobs in solar pv installation the the kind of german manufacturers response to the perceived dumping of cheap panels from from china you know that the german industrial policy was about back in a few years ago trying to build a market for solar pv panels in order to build the manufacturing industry i remember hearing a speech from a former german civil servant he said well it's not as if germany is the sunniest place in the world but but we want to make these jobs here so we're going to create a market to to create this job and they succeeded unfortunately then they've seen the market for their manufacturers be undercut and i think a lot of what felix is talking about about these uh the communities that can benefit from community energy i think we should also recognise the community benefits that could come in and i think you know felix makes some very valid points about where those benefits have gone to but whether those sorts of schemes develop or not it's not just about a sort of a push from top down it's also a pull from the community themselves and how can we facilitate that and a lot of that comes about i think because the alternatives are maybe quite limited and that's just a factor of geography uh you know a lot of the most of the sources of energy that we want to use whether it's for heat or for light or for transport are going to be variable and indeed the need for energy is variable uh so what do you do about those imbalances well you can spill those out in time that's what storage means or you can spill them out in space so if someone else has got a surplus at the moment you've got a deficit and vice versa and that's what networks do and you get out into these more remote places and the networks are quite expensive and actually storage technology and other sorts of things become more cost competitive in comparison but it doesn't necessarily mean that the whole thing is going to be cheap uh and so that's where i think the kind of the local economic benefits become so important in terms of making a case for the investment that facilitates all sorts of other things in those kind of places exactly how we do that that goes way beyond my kind of area of uh any sort of expertise i'll leave that for others to discuss okay thanks okay and lose it only want to come back in uh well i've i've those those were were um very uh useful comments i wondered um in a sense how you link those with some of the bigger questions around uh the overall energy balance because a number of witnesses commented on how that is um uh is changing or is potentially changing and i think on the one hand uh there are things that can be done into at a more community level which we've heard a bit about and i think that's good but i'm also concerned to um find out i think a little more about what witnesses think about the macro some of the macro questions as well carbon capture was mentioned for example um and uh how your tribute costs going forward i think was uh also very important so i think that would be my other area that i'd be interested to get comments on whether from those who've mentioned it already or from other witnesses martin's go yeah yeah so i mean i i think one of the things that that sort of matters out of the system level is where scale still matters so we have certain technologies like solar which are very modular which can work economically at different scales community scale even household scale not to say that uh ground mounted solar farms aren't an important kind of and perhaps a particularly economic way of deploying solar but i think for things like ccs and for offshore wind uh scale matters a great deal so economies of scale still matter in big parts of the energy system and i think that then becomes problematic because i think uh yeah i think the current kind of uh reluctance to support innovation of the kind that reduces the cost of these large technologies which is about deployment support so one thing the government is now saying it's going to do is spend more money on innovation but the suggestion is i think that that's that's the longer term view of spending money on research and development and there is an argument in parts of the policy community that that's you know the best way of spending your research money i think the evidence you know there's a lot of evidence that suggests the way these technologies actually get their cost down is by uh trial deployment by demonstration projects um this is where you know you discover the cost of these things it's very easy to kind of end up with very optimistic cost assessments in a system model which would suggest you know you do a lot of things on ccs and offshore wind in the short term i think what we've learned about those technologies you know doing the modelling work over the last 10 years is that you discover the cost by by trying to build them and the problem is that uh that requires significant capital sums so you know i think i think uh whatever increase the government have been the UK government have been have announced that they would spend extra on r&d uh is is just outweighed by the decision on one billion savings on the ccs demonstration programme without any kind of suggestion that there is another route for ccs deployment so um you know i i committed climate change in recent fifth carbon budget advice are still saying ccs promises to reduce the cost of the UK decarbonisation transition by 50 so there's a huge suggested role for ccs in the longer term no suggestion that that's being faced up to at the moment so where do we go and you know apart from the fact that the way the decision was made uh lacked kind of any kind of forewarning for the industry and the research community so that's that's automatically done quite a lot of damage but i i i'm really concerned about the the large-scale technologies that are still seen as a really big part the solution that aren't seen as part of the innovation solution at the moment um yeah i'd like to come back on uh both the general point and on ccs which at one point i knew rather a lot about him as engaged in i agree absolutely with what mark has said it is not just about the cost actually globally the world can't meet the two degree target or whatever target is agreed in paris without ccs because although it has been typecast as a way of protecting coal actually you've got to have it on gas fire power generation and you also need it there is no other technology for so many of our industrial processes refining and cement manufacturer among them so it is an extraordinary decision a really bizarre decision at this point in time so far down the road for that money to have been withdrawn and it leads me on to the general point which is that there didn't seem to be a linkage across to any industrial policy because we were building a supply chain we have a lead in the UK we have excellent storage for co2 which would be usable by other countries in europe who don't have storage capacity and so as an in a long term play for a growing market which could provide a lot of benefits industrial commercial and otherwise ccs i think ought to have been part of our vision for the energy sector and not just for the electricity sector and so i think that makes the general point which Keith mentioned and Lewis asked us about the macro impacts which is that one is always at risk in this area of focusing on a bit of the problem and not thinking about co costs and cost benefits i mean i don't dissent from Angus's points about the levy control framework but the way it is calculated has caused the treasury in London to say well we we can't afford to put these burdens on cost and we're on track i mean actually on track for the renewable target within the power sector by 2020 but that's a very short term view it's not taking account of the need for continuity which you've heard about so eloquently from others in relation to solar where once you destroy those skills in that supply chain then it costs a lot of money to bring them back it's not taking into account the medium to longer term costs and it's not taking into account the impact on cost of the damage to confidence and that was an issue a moment ago because actually it increases the perception of risk and that increases the cost of capital and in the other point which i made in the introduction is that we have to look at this system as a whole i mean what is our vision actually for the grid we inherited a gold plated grid built under the national nationally built you can't expect people to build a replacement for that grid which is modern and which takes account of full innovation and enables us to do things like maximise our management of demand response maximise the contribution of renewables by doing it piecemeal so i think that's a really important issue and how you attribute the costs of that grid to the users of the grid either new people coming on to it or people who are actually on it will affect fundamentally what the shape of your system is in the future as well as the viability of some of these sectors thank you right i'm very conscious of the time i've got lots of members who want to come in and lose i'm going to have to move on i'm afraid because i'm really troffered by Patrick Harvie good morning to witnesses the last comment there about the the vision about where we're going and also the use of the phrase industrial policy are very much welcome because i think it's been messing from from some of the debate we started with a question about how attractive an environment the UK is for investment whether in solar or other sectors of renewables and you can't answer that question without thinking what are you trying to achieve how much are we trying to achieve the climate change committees the UK climate change committee operates a number of different scenarios for where it sees renewable energy generation going the lowest end of that suggests at least a doubling of installed capacity and more than a doubling of electricity generation from renewables by 2030 and we're already looking like we may fall short of the 2020 target in scotland as a result of UK changes the the higher end of those range of scenarios suggests a trebling or more than trebling of of that installed capacity so the question the question is very simple is the current UK policy or financial framework remotely compatible with any achievement within that range that the climate change committee is saying is clearly necessary by 2030 thank you thank you so i think the the answer to that question is that there is some grounds for hope in the sense that we talked about the difference it was Neil who talked about the difference between offshore wind and the other sectors in terms of investor confidence i think the offshore wind sector has been careful to cuddle the UK government close and to be supportive in the hope that it will continue to get CFD support and the proof of the pudding will be a needing but there is some hope that that will continue to happen i think that's very important because offshore wind is probably the one of the three major technologies where the UK has gotten the most potential to export expertise and create supply chain jobs so so that that's very important the other thing is the government has mentioned on a number of i'm talking about UK government here has mentioned a number of occasions the possibility of a subsidy free CFD for onshore wind and solar and quite what that means is unclear because with both of those technologies you're not going to get anything built just on the on the basis of wholesale prices because if you have a windy day a lot of generation wholesale price will kind of tend towards zero so there has to be a mechanism for actually giving some sort of tariff certainty there so what that is and whether it's subsidy free or not is a interesting question that it's unclear what it means doesn't sound like its grounds for hope well no i think i think its grounds for hope because it sort of gets gets round the rhetoric from the UK government about we will not subsidize these technologies any further if it can come up with a sort of form of words that enables them to say that it's subsidy free then i think there's room for something to go forward and actually Scottish Renewables has talked about a figure of was it 80 pounds as being a possible per megawatt hour as possible definition of subsidy free and we can argue about whether that's too high a figure or not but it might be possible to bridge the the divide in rhetoric between the UK government and the industry and come up with some kind of figure that both could agree was subsidy free in terms of the CFD a brief idea and i'm not going to hear from Tony McCall on this in a second so so i'm i'm wary of jumping in and allowing Patrick to put words in my mouth i can't remember the precise question but let me answer it let me answer it this way i don't see that we have a policy framework in place at the moment that will deliver the scale of renewables that the committee and climate change clearly believe is required to hit future carbon budgets in the way that keeps cost downs for consumers we think that onshore wind and solar can make a significant contribution to the scale capacity set out by the committee and climate change and we best believe that is best done by continued although reducing support from the UK government and that that would best be achieved by implementing some kind of contract for difference at a level that we could agree was subsidy free so it wasn't Scottish renewables who came up with the figure of 80 pounds a megawatt hour that was the committee and climate change has asserted that anything at or below 80 pounds a megawatt hour should be considered subsidy free because it is below the cost of alternative alternative generation ie new build gas generation plus carbon costs. Tony McCall do you have do you have a view on this question of costs? No, I agree with Angus and Patrick that the current policies at the UK level are not shambolic they are changing and creating a lot of uncertainty but one point I wanted to make was that a very small proportion of the equipment that's going into the wind farms both onshore and offshore and the marine energy projects in the Pentland Firth is actually built in Scotland. Now some of the older members of the committee might remember the offshore supplies office. When the oil and gas industry was being developed in the North Sea the government said that up this body called the OSO the offshore supplies office and it had a policy or a target of making sure that at least 70% of the work on the North Sea oil fields was done in in the UK and it worked. You might remember the old fabrication yards at Neganadys here and elsewhere now I would say that the share the UK share of the renewable energy including possibly the solar is probably about 10%. The turbines are all been built overseas that oil last week placed a contract for this new floating wind farm of Peterhead and the contracts gone to Siemens who were going to build the turbines in Germany. So the UK content of a lot of these developments is tiny and because of that the number of jobs on the supply chain is similarly tiny. I was interested in people's views on what they perceive the UK Government's motive to be in this regard. If there was a consensus around renewables why are they just simply causing chaos and I wondered whether to some extent it reflects what is evident in some local communities that there is an exasperation about the level of onshore wind turbines and a sense that you will never generate any interest in offshore or tidal or wave or whatever because the subsidy is sitting there for onshore. Do you think that that is what is happening and how would you address that? Or is there something else that is driving us? Have they fallen out of love with the idea of renewables altogether? I am just interested in people's views on that. The second point is about community energy. I believe that one of the strongest argument for community energy initiatives is the economic impact on the local community in which they are developed. In fragile communities, they create jobs, economic opportunities and they might stabilise the economy. Does one of them know whether that has in any way been quantified? If it simply does not really make a difference, why would you spend a little bit more on one turbine or two turbines? If it does make a difference, it is obviously something that you should then be strategic about and create an incentive round. I will let Felix White answer the second question while you apply your mind to the first question. In terms of the difference, the figures that we generally use under the old model, a one-megawatt wind turbine, would generally generate about £5,000 worth of income for some sort of community benefit scheme. If that wind turbine was community owned, that figure would be £100,000. The difference is material. It cannot be applied in all circumstances and we certainly do not believe that community ownership is the only model. Is there space for more of it? Yes. I think that, particularly, we look at the opportunities that have come up on publicly owned land through things like the Forestry Commission's schemes for community investment. There is a real opportunity for that to be a bigger part of the mix and it does make a real difference, not just financially but in terms of attitudes. There has been a survey after survey that demonstrates that local ownership is something that most people are overwhelming in support of. In terms of planning outcomes, over 90 per cent of community schemes have a successful planning outcome, so it is not just in terms of local support, it is also through the planning process that that gets recognised. Is economic benefit to a local community and because people like it, it encourages people to move towards renewables. Is there a strategic approach to encouraging communities to do this or is it entirely happenstance? We believe that, from the UK Government's approach, it has not been very focused in supporting community energy. Lately, it launched the community energy strategy in 2014 but that has not led to material support for communities, which is why we hope that, at this juncture now, with the feeding time all but over, they will, from the ashes, use the remaining funds to provide more focus support. Within Scotland, yes, there has been focus support through the Scottish Government's Cares programme but that really tries to make the most of the materials that are made available by the UK Government rather than really sink significant funds within Scotland for community schemes. Keith Bell and then John Foster I think that we can all speculate in the same way about the motivation of the UK Government and I do not have any direct line in there, of course, but it is clearly documented that there is opposition from a lot of the shires to development of wind turbines in respect of the reduction of support for solar PV. John would have a view but maybe in some way, ironically, the success in the cost reduction has made them believe that it is more successful than it has been. Why are they so in favour of offshore wind and of nuclear power and why they have withdrawn the support that John Foster was talking about to CCS? I think that that is a slightly harder question. It does not seem to tally with what they claim about reducing cost to consumers because, in terms of low-carbon energy, nuclear power and offshore wind are pretty expensive ways of doing it relative to the other options. Although, as Angus said, there are some areas of potential other economic benefits from that. That would be the first time that they have come up with some industrial strategy that is linked in with it, even if they have not said it. I think that what Mark has said about big technologies is really important and the way that one learns by doing. When we had the financial crisis a few years ago, people talked about the banks being too big to fail. Maybe in some way, nuclear power and CCS are almost too big to succeed. It takes a huge amount of investment and effort to get behind it. There is gossip, but I have heard nothing more than that about why they have withdrawn the support for the CCS competition. One is that they have only got one competitor, so they are not just going to give it to them. The other is that some of the big energy companies globally are interested in this. Some of the partners in both White Rose and the Peterhead scheme, big global companies—maybe, this is some of the rationale that I do not know—should have the wherewithal to put their investment in and get the benefits from it. I am sure that Joan would have more insight into that than I have. To answer your first question, it would be reasonable to assume that, from the range of subsidies that have been cut and the range of technological solutions and the range of scenarios and scales that have all been cut simultaneously, if you take domestic feed-in tariff, it might be that people are worried about winter binds, but to cut that tariff by 87 per cent for solar really shows that the decision making has got nothing to do with whether somebody dislikes a solar farm or a wind farm. Somewhere in there, there are other drivers. For most of us who are close to it, we probably believe that it is coming from Treasury as opposed to DECC, even though DECC is making all the announcements at the end of the day. To pick at one or two others very briefly there, recognition that there is a need for traditional generation is quite widespread within the renewable sector. For those who have made the points around that are questions, but a decarbonised solution, hence support for the concept of gas with carbon capture. Equally, it is the idea of a devolved energy and devolved use is the future. We have talked a bit about long-term thinking and a very quick scenario that I have used a number of times recently, and it seems to work. It is about what a new house might look like in just five years from now, where we build a new home on the roof of it, the solar PV and solar thermal for hot water, the storage for both inside the home, the car that pulls up outside the house is hydrogen fuel cell with an electric battery in it for most of its power source. In the summer time, the excess power that is created by the PV in the house will charge up the car. In the winter time, when the house is a bit short, the car will charge up the house's battery system to support the house for the next 24 hours. You will top up the hydrogen when you are down at Tesco. Those technologies exist now. You can buy them all right now. What does that mean? That means that the house will virtually not need large energy. It will still be connected, but it will have little use for it. It will provide its own solutions. There will be self-funding solutions, because the cost of energy will rise inevitably, particularly when you look at the cost of, like, the Hinckley example is a great one, for just how expensive energy is going to become. If we think that it is expensive to support energy now, we wait until we get five or ten years from now, and it is going to look really scary. The solutions, the potential for manufacturing, and all the other things that we have talked about are hidden in that little model that I have given you there. Those are realistic. You will be able to drive up to the house and there will be a plate charger, and you will only need to plug it into the house and it will connect itself. I think that it is quite important in having this kind of discussion, that we can try to understand where UK Government has got itself to. What they are saying in terms of the latest projections is that they expect the supply industry carbon intensity to be about 100 grams CO2 per kilowatt by 2030. That is on the upper range of where the CCC wants it to be. It is on the absolute upper limit, but it is still projecting a very significant decarbonisation of the electricity system. The Government has not abandoned the commitments in the Climate Change Act, and we have to recognise that they see a consistency between a much bigger role for gas in the 2020s and a conditional support for offshore wind with the meeting of the carbon budgets. We have to maintain that and keep that to account. I think that there is a legitimate concern about the LCF going up to the maximum headroom by 2020. That is a very legitimate concern. You mentioned a chair of a higher figure who used £13 billion to be well above the headroom. To some extent, some of that was going to happen. I think that the question is what we want from a Government who is looking to do a rational economic re-look at the policy. That means accepting that some of the direction of travel would have been happening, but I think that what has put a large part of the research community and the industry into consternation is just that the hap has a nature of the way that has been done. The policy announcements have been made without any sense of a system view. When I read the latest energy projections, there is no suggestion that there is a very strong commitment to a longer-term transition after 2030. That is just not there at all. We are storing our problems in the terms of the kind of plant stock that is being built or suggested that that is going to be built. There is an understandable reining back in on the subsidy regime, but what is missing alongside that is a commitment over the longer term. The question of the system cost of intermittency was also going to have to have another look-out. The problem is that, as is proposed in Amberhead's speech, it is suggesting that every intermitten source has to bid independently of itself as firm power. Again, there is a lack of a system view. How do you balance the system? How are the costs of intermittency borne across the system? The danger is, with a view that every intermitten source has to contract for its own backup, for its own reserve, that you have a great loss of all the benefits of the system at scale to supply that much more affordably. Some of that is legitimate concern, but I think that the way that it has been gone about is probably far from economically optimal. I want to talk about the narrative that has been presented around it, and that has very much been around the costs of want your wind and solar, despite the fact that the latest projects are 14% cheaper than the deal that has been agreed with, I think, the nuclear power station, and that they are the lowest-cost, low-carbon technologies that can be deployed at scale. There has also been a focus around intermittency, despite the fact that gas and renewables are potentially a very good fit for the future energy system. Clearly, the party of government feels that it plays out well with what they would say is their constituency, despite the fact that every survey has shown something like two thirds of people in Scotland and across the UK support the growth of want your wind. It is very briefly on communities and jobs. Again, the Business Innovation and Skills Department published a study in March earlier this year. It showed very clearly 21,000 jobs supported by the wider renewable sector across Scotland, and those are very much geographically spread and diffuse around communities all over Scotland. One of the ways that communities have funded their projects is through local share offers or local funding rounds. I think that there is a big opportunity for us to scale those up and do something on a national scale that allows us to widen ownership of the sector through some kind of bond or some kind of national wide investment scheme to really widen ownership of the sector, or we can possibly achieve the same outcome if we see more public pension schemes investing in the sector. At the moment, I think that it is only the Strathclyde pension scheme that is really invested in the sector, and it is at a very, very small scale, which is a 10 million investment with the Green Investment Bank. I think that there are plenty of ways in which we can redefine community ownership and also widen ownership of renewables in Scotland. Do you not accept that there are places in Scotland where they feel that there is an over-concentration of windfarms in particular areas, and that do you not accept at all that there may be an argument that there is no incentive to research and develop offshore because onshore is doing very nicely, thank you financially, it stacks up? How do you, or do you not think that there should be that shift towards offshore? So, I think that there is still plenty of scope for the growth of onshore wind. There are schemes which have already got consent, which our members are telling us that they are not going to invest in and build out because they missed the opportunity, they missed the deadlines to the arrow, they have not been successful on the bid for CFD, so there are already schemes which are consenting which will not be built because they do not have a viable investment case, and I think that you have to look at offshore onshore wind separately. So, there is plenty of interest in offshore wind, but the people who want to develop offshore wind are waiting on the next option round to be taken forward by the UK Government. Okay, I'm very conscious of the time, it's 11.30, we said we'd run for 90 minutes, I'm minded to run until 11.45, which gives us a little bit of extra time, but we serve very tight for time, I've got three members who haven't had a chance to say anything yet, we've been very patient, so I'll need to go to them first, so we'll start with Joan McAlpine and then Chick Brody and then Gordon MacDonald, and then we have any time we'll bring other people in, but I'm not sure we will, Joan. Thank you very much, convener. I just wanted to concentrate on the technology that we haven't said enough a lot about so far, which is marine renewables, and we had a very interesting session earlier this year in April on marine renewables. What came out of that? We had Neil Kerrmoge from the European Marine Energy Centre in Orkney speaking to us, and one of the points that he made, which relates to what Tony Mackay talked about about developing technology out with the UK, was he compared the way we treat marine technology with the way the Danes invested in wind going back several decades, and he talked about how the Danes kept faith with wind even when they had setbacks. As a result of that steady investment, they are now supplying, you know, turbines and their leaders all over the world. Whereas what he said was going wrong with marine technology, it was that we had been too focused on getting a very quick return. We were rewarding the UK electricity market, rewarded companies in terms of the amount of electricity that they could produce quickly, and that resulted in setbacks. Their real fear was that because there had been this initial setback, we were going to lose faith with marine technology, and others would then take over in terms of the markets. They also commented that they felt that contracts for difference were inappropriate for marine technology, and that investors did not have confidence because of the failure to guarantee the kind of grid and interconnections that were needed to support marine technology going forward. I wonder if some of our panellists would want to reflect on that, and if they recognise those concerns. Tony Mackay, you say in your written submission quite a lot about marine energy, and you make some comments about Wave Energy Scotland. Do you want to respond to that question? Yes, I am an economist, not an engineer, but I have a friend who has worked at EMEK in Auckland for many years, and he said to me repeatedly that a lot of the R&D work that was going on there by Aquamarine and Palamys and other companies was never going to be viable. He is an engineer, so he was saying from a technical point of view that those projects were never going to become commercial. Again, as an economist, my impression is that there are tremendous realistic opportunities in tidal energy. I was over in Nova Scotia recently, and they made a lot of progress in the Bay of Fundy. In the three or four years, we will have some commercial tidal energy projects, but I just feel that the 20 or 30 million that we have lost, or that the public sector has lost on the Wave Energy projects, could have been better or reused. I think that Neil Cormod had said that with emerging technologies, you need to fail before you are successful. If it is all predicated on becoming commercial, successful right away, that is not necessarily going to result in the long term the best technologies. Yes, I would accept that. Just briefly, I think that Tony is right to distinguish to some extent between Wave and tidal technologies. My understanding is similar to that tidal is closer to being commercially viable, but I think that the point that you make about the difficulty getting investment is correct. My own experience of talking to a colleague at the University of Strathclyde, who has a proposal for a particular tidal turbine, has gone out in a spin-out company, the sort of thing that universities are supposed to do, terrible difficulty in getting investment. Actually, there is a big dependency on on outfits like Scottish Enterprise, Hans and Ion's Enterprise. There is a tension there, obviously, between the venture capitalists who want their short quick return and a lot of return, versus some of these state funding bodies and whether they do make mistakes. Maybe they do, as Tony is suggesting, but on the other hand, he is absolutely right that, especially the less mature technologies, there will be failures, there will be things that you will try and they won't work. We have to be very cognisant of that. I think that not only they may make mistakes, but I think that if we are going to get the innovation that we need, state funding has to be prepared to tolerate some failures. Failures will then be written off either because the whole technology was wrong or because it is at too early a stage. The tidal is very promising and a lot of the technology is mature because it is precedented in hydrogen, the turbines. I think that that brings us back to the point about long-term investing and long-term confidence. With the resources that we have around this island, it will be a huge missed opportunity not to think in terms of how we can exploit our armory and technology. I think that innovation is going to become increasingly important in the energy system as a whole. I think that there is going to be a huge global demand for innovative solutions in terms of the way that we manage the energy system and things like energy storage. I think that the UK and Scotland should be alert to that and how we make more of the world-class expertise that we have around this table, but also around Scotland. In terms of wave and tidal, we have had to reconceptualise where much of the wave and tidal sector is and that we are in a research and development phase and perhaps a demonstration phase. Therefore, funding should be packaged in a way that is appropriate to that. We are also demanding that this research and development activity comply with the rules for commercial generators. For example, the same grid rules that cover long-anit, cover e-mech, and there is a massive burden of grid charges. While we are funding industry to research and develop, we are taking money, charging disproportionate amounts of money for people to connect to the grid when they are at a research and development phase. I need to move on again. It was interesting hearing Mark talk about using words like, we need a hard reset, we need a rational look, the whole research of the Government is haphazard, we need a commitment. I think that all that is true, particularly when you look at the paradox of, as we found out in a meeting here one evening with the Institute of Nuclear Engineering, that it will cost us £1 billion a year just to ensure tinkly point, and yet that is a very sum that has been denied the CCS activity. That is all great and the information is very useful. I want to look at the most short-term activity. While we talk among ourselves about what action we can take with the UK Government in the immediate term, two weeks ago, at the Energy and Climate Change Committee, the director of the UK systems operation at National Grid said that it had a durated capacity margin in the system of 5.1 per cent. She then indicated that it just carried out a notice of insufficient system margin, which is the first NISM that carried out for five years. We now have questions being asked about the system margin. Later on, we had James Heapy MP who asked the question about the electricity capacity being 68,966 megawatts, capacity loss being 7366, taking that down to 61600. I am coming to it. I am sure that you will wait for it, convener. Then the duration of the rate of 85 per cent meant that it came down to 52,000 megawatts when the winter outlook this year is for 54,200 megawatts. While we enjoy the conversation, what are we doing to sit back and not take on the UK Government, and are we happy to have power barges and power ships on our rivers as it is currently being planned? What are we doing? Is that a rhetorical question? I will take Gordon MacDonald's question as well. I will then let as many of the panellers respond to both points, because otherwise we will run out of time. It was just the opening remarks that Joan gave and also about the World Energy Council report that placed the UK a negative watch for affordability. I just want to try to understand why the UK Government appears to be moving away from the cheapest renewables in favour of gas and nuclear. How do we address the subject of affordability to the public, anti-industry, because that impacts on jobs? Joan, why do not you respond directly to that point first of all, and then perhaps others either come in on that or respond to Mr Gordon's point? The UK was placed on negative watch because although it has maintained a high rating, it is in the top five of 130 countries. It was felt that the security supply was under threat, the capacity margin that we have just heard about, and its affordability performance has gone down. I think that the key message that is coming out from the work that we are doing with 130 countries is that it can add to the costs of decarbonisation by increasing the perception of risk and the perception of political risk. Some of the debate ahead of the UK general election on affordability just stopped quite a lot of investment because people were holding back. Maybe that was at times when investments should have been made, so already you have a suboptimal outcome. If you do not know what the clear direction of policy is, you will have to think in terms of that it is a higher risk project and that your cost of capital will encompass a higher risk premium. That does not mean that you can expect—or businesses expect—an unchanging policy and flexible policy. Of course, the policy has to adjust to take account of changes in circumstance, changes in cost or whatever. However, what you need to do is communicate what the triggers for those changes are going to be, which could be timed review points or percentage cost reduction or a certain level of deployment. Reading Amber Rudd's speech, one of the justifications that she gave was that, because the UK is on track for its 2020 targets on wind and solar, the field justified in looking for control of costs there. That was not signalled before. I think that the predictability of how change is going to happen. I think that there is quite a lot that could be considered in Scotland around costs within the context of the devolved powers, but that is maybe a conversation for another day. I will take some more points. I think that Keith Bell will first go on my eye. The electric security supply is home territory for me as an engineer. If you look at the UK Government's loss of load expectation standard, which underpins the capacity market, a derated margin of about 5 per cent is about the right answer. You can have a discussion about what that means in terms of whether the risks are acceptable or unacceptable. We can never have no risk. Whether the capacity market delivers what it is supposed to—that is 2018-19—is when the capacity is supposed to be available. Will it all deliver? That is a valid question. What happens in the meantime is a valid question. Part of me, as someone who used to work in the electricity supply industry, inevitably says that they do not do things as well as they used to. At the same time, the system operator with two transmission licences in Scotland has some very professional people working in there. I have a lot of contact with them. There are some methods that we can help them with in terms of academics and new things, but, at a certain point, we have to trust them to get on with it and do it. I believe that the barge was offered. My understanding is that that was not where they placed the contract. It was with Peter Head. Just a very quick point, pulling together what we are talking about on affordability with Jo-Anne's question about UK Government motivations. I think that one of the motivations is concern about electricity bills. A few years ago, after financial crisis, there were a lot of public concern about utility bills going up. Gas prices went up more than electricity bills. I think that the Government is not looking carefully enough at its own numbers, because electricity bills went up by 25 per cent between 2010 and 2014. That is based on an assumption of constant kilowatt-hour use, but kilowatt-hour use was going down. Energy efficiency and other measures were reducing the amount of electricity households we were using. If you take that into account, the increase was only 14 per cent, not 25 per cent. It is still an increase, and a lot of it was not due to renewables. The electricity bill factor is not as much of a problem, as the UK Government says. Felix White. In response to Mr Brodie's question about practical measures that can be taken in the short term, I think that in Scotland we have a risk of having a lot more stranded assets. As a result, in part of the existing electrical infrastructure, I am not being able to accommodate the output of operational generation schemes. I would like to see the Scottish Investment Bank move off gems, which has already supported the model, to underwrite investments that individual generators cannot afford, thereby fast-track investment in infrastructure, which means that generators can operate at their full output. One step. The second step is to encourage, as much as we can, the UK Government to keep the focus on including within the next CFD allocation support for remote island wind. There has been a lot of effort by the Scottish Government to secure that. It has gone a bit quiet, but that is very important. That comes back in because you have got several hundred megawatts of jetting capacity consented. It could be built very quickly if we get security over the business model that should come from remote island wind CFD. Thank you. What are they doing in the short term? The answer is generator farms. Diesel generator farms sharing connections with large wind and solar schemes in the south of England, and the Government is subsidising them. There are 159 of them currently going for planning to get operation in the coming months. Diesel generator farms connected to existing solar and wind sites. The logic of the connection is one that, for example, solar supports with wind, because there is a very good logic where you have a wind connection and you connect solar alongside it. It is a strong potential opportunity for a lower-cost solution to installing solar alongside wind in the future. As I said earlier, we have heard that it works well together, but that is what is happening right now. Ask yourself what we have said. It has been a while since I looked at the figures, but, certainly over the past few years, the UK has had amongst the cheapest gas prices for consumers in the EU-15. It has been no worse than average in terms of electricity costs. In terms of what the Government can do to help the power industry to grow and deliver the power that we need. In our sector, capital is a huge cost to the sector. It has been described by one of our members as the fuel of the renewable energy sector. We need certainty to bring capital into the sector and to keep costs down. That is best done by working with the industry to create a viable investment framework. We think that that is best done through the existing mechanism, which has been developed over the past five or six years, which is the contract for difference mechanism. Through that, we can secure new generation whilst putting pressure on costs and keeping bills down for consumers. On that note, we will have to end proceedings. I thank all our witnesses for their time and coming along this morning. It has been very helpful. Clearly, we had a fair amount of time, but we did not perhaps get as far into all the topics that we might have done if any of the witnesses would like to write to the committee and add anything to their evidence. We would be very pleased to hear from you. It would be very useful if you were able to do that, because I appreciate the time that was constrained. Thank you. We will now suspend and go into private session.