 Welcome back to the session of the Economy, Jobs and Fair Work Committee. We have now with us Paul Wheelhouse, Minister for Business, Innovation and Energy. Welcome to you. With the minister are the advisers Chris Stark, who is director of energy and climate change for the Scottish Government, Mike King, who is economic adviser, Sue Kearns, head of electricity and Kathy Robertson, who is head of the heat energy efficiency and low carbon investment unit. Welcome to all of our guests today. Minister, if I might start just by asking a question about emissions reductions. I think the planned emissions reductions to 2032 in the transport sector is the planned reduction of 31 per cent. Of course, emissions are a big issue in terms of the health of the country if we think of areas in the country such as St John's Road and Crestorfen here in Edinburgh, one of the most polluted roads in the country. My question is, is the target set out a realistic one and how will that be achieved? It is a very important area. First of all, I would like to acknowledge and thank you for the invitation at Pew for the committee today that transport is an area that we acknowledge and have to make more progress in. We are trying to work to deliver effective solutions. Using the times model that colleagues can provide some technical background on, we have been able to look at what are cost effective pathways to deliver our emissions reductions targets for up to 2032 and beyond to 2050. In the case of transport, we know that there has been a great degree of challenge in the past in that emissions reductions and vehicle emission standards have improved dramatically in terms of the motor vehicle manufacturing trade, but that has to some extent been offset by increased usage of vehicles. In short, people have had more efficient engines that they have driven further than they had done previously and that has cancelled out to some extent the efficiencies that have been generated in terms of the technology itself. We have to look at alternatives to deliver transport emission savings. One of the key ways in which we can do that is to decarbonise the vehicle fleet themselves. If people are continuing to drive, they are doing it in such a way as it is not adding significantly to emissions as current vehicles do. Hence, there is a lot of emphasis in the strategy around the electrification of the vehicle fleet. That is not to ignore the very important work that we are doing in relation to promoting hydrogen in Scotland. We are doing excellent work both in Fife at Fife Energy Park and also in Orkney with a project that has taken place in the EMEC, the European Marine Energy Centre, in partnership with local interests there, to develop use of hydrogen both for storage but also in use in vehicles, in case of Orkney, in case of the ferry fleet but in Fife in respect of council vehicles, Kangaroo vehicles, transits and indeed Refries Collection vehicles. We are doing a lot of work pioneering with new technologies and alternatives to diesel and petrol but equally we are keen to advance the uptake of electric vehicles in the Scottish fleet. We have set an ambition around about 40 per cent, just over 40 per cent by 2030 of vehicles, new vehicles being bought to be electric or hybrid vehicles. That is consistent with the pathway that you refer to, convener, in terms of the more than 30 per cent reduction in emissions from transport. Do you think that that is achievable? We are trying to work with the context that currently half of the balance between devolved and reserved powers including some of the powers around transport are reserved. We are making assumptions around what is achievable at a UK level and what more we can do to try to increase the uptake of use of electric vehicles to the extent of roll-out of electric vehicle charging points. For example, where Scotland is doing some really good work and has a well-developed network of rapid charging points for electric vehicles. We can do some work on the infrastructure side to help support and change behaviours through car clubs and other means to increase the uptake of the use of electric vehicles. At the same time, we have to bear in mind that we do not have all the tools in our box to influence that. We have tried to be realistic about what we can achieve. It will be challenging, I know that Humza Yousaf and colleagues in the transport team would say that the figures that have been set out are challenging and indeed they are, but we have to be ambitious if we are going to try to achieve the scale of emission reduction that we need across the economy. I am bearing in mind that if we do not make progress in transport, some other part of the economy will have to pick up the additional emissions reduction that will be required. Just on that last point, moving vehicles to electric vehicles, of course that energy has to be produced somehow. Is that going to be from sources that do not themselves cause carbon emissions? We have tried in the draft energy strategy but it supports the climate change plan to develop a strategy that has taken a whole system approach. We are looking both at supply and use of energy. You are right that as we electrify transport and also heat, in respect of some aspects of our heat supply, will have to be electrified, whereas it is not appropriate for other solutions. That will mean that it is going to be a growing demand for electricity and hence why the strategy is also looking at the supply and needs to further invest in renewable sources of electricity and, indeed, other supporting technologies such as pumped hydro storage to ensure that we have the capability to deliver the electricity that our economy will need, whether it is transport or heat, or, indeed, for our wider electricity needs. I will now move to a question from John Mason. In the electricity section, we have the policy outcome 1. Scotland's electricity grid intensity is below 50g of CO2 per kilowatt hour. In itself, one of the milestones, for example, is that the UK Government delivers a viable route to market for a wide range of renewable technologies. We have had witnesses who have raised this point about how reliant we are either on the UK or on the EU for making some of those things happen. I would be interested in your views as to how dependent our way on them and how much is under our own control. Well, certainly when it comes to electricity generation, it is probably the easiest example to talk about when it comes to that. The key financial instruments that influence the deployment of renewables are very much within the Westminster Parliament's control. For large-scale deployment of offshore wind, for example, the contract for difference auction process is the way by which funding is allocated to projects. The Scottish Government does not have any direct input into that process, so therefore we are at the mercy of UK ministers in respect of the financial instruments that support the sector. However, one of the key areas that we have had a fundamental change in the environment in recent years has been in respect of onshore wind. Onshore wind currently now has no subsidised route to market for new projects coming on stream. Now, it is worth putting in context that there is over 11 gigawatts of renewable projects that have been going through the consenting process in Scotland. Therefore, we have a very strong investor interest in investing in Scotland, but currently we know what they would call route to market, in other words, a guaranteed price for the industry to underpin a long-term investment decision, so that is very destabilising. When it comes to pump tider storage, there is no route to market at all either. We have existing stations that have agreements with national grid and are regulated by off-gen around providing energy from pump tiders or storage facilities in foyers and in crookens, for example, which help to balance the grid. They are being heavily used in ensuring that the quality of the electricity that comes through the network to consumers is of good quality and reliability and does not have fluctuations that you may sometimes see in lighting, in particular where it is more obvious, where you get fluctuations and lights flickering. To avoid that and ensure that there is quality supply and to ensure that there is sufficient black start capability if there was a power outage, pump tider storage is important. We have massive investment projects lined up for Scotland in Corrie glass above Loch Nessan and Dumfries and Galloway at Glenmuckluck, which will go ahead if there is a route to markets. Those are hundreds of millions of pounds each project, but we need a route to market similar to what we have encouraged UK Government to think about as a similar mechanism to that for interconnectors. There is a capping floor mechanism, so the developer has some certainty about the price being within a range. We are not a guarantee price, but they have an upper and lower level and they know that their investment is relatively secure. That is what the industry is looking for. Again, we need UK ministers to be expansive on that front. When it comes to offshore wind, we have made the point that we recognise that UK Government has, in their view, an electoral mandate to not subsidise new wind energy projects. We believe that there is strong support for projects in Scotland from local communities who want them to happen. The solution to cross that problem is to encourage UK Government to allow a zero subsidy CFD auction process to take place. No public subsidy whatsoever, but to give a guaranteed supply of electricity, a guaranteed price to allow the development to have sufficient certainty to take place. We have some influences on how we can support, particularly community-led schemes. We are doing work through our Reef, the renewable energy infrastructure fund and CARES, which is a fund that we use to help support communities to develop the feasibility of projects. We try to help community projects to provide support through the planning system to new renewable energy sources to be deployed, but unfortunately, the financial instruments are under the control of the UK Parliament. From what you are saying, the community side, which we would have a lot more influence over, but there are other areas where I am not arguing with your arguments, but you are going to put those arguments to the UK Government, but they may or may not accept them. If they do not accept them or do not accept all of them, does that put some of our targets and aims at risk? There is no doubt that, and I will be explicit about it, it is becoming more challenging to meet our target for 2020, the 100 per cent target. We are still pursuing that and pushing for that. We have invited to the draft energy strategy that sits alongside the climate change plan and the industry to feed back into us their thoughts about how best we can deliver perhaps what should be a UK first, a zero subsidy on-shore wind industry. We are inviting people to come forward with ideas on how we can deliver projects. That means that the Government is working with the industry to see if we can identify areas in which we can eliminate cost to try, and there are obviously some exceptional costs that affect sites around the UK, MOD, NATS, national air traffic control system, where they have an impact on cost, but where we can directly influence who is trying to be supportive around the planning system and to encourage the industry to look potentially at areas such as re-powering existing sites as well as an extension of life sites. Where an extension to life might help is that it proves the economics of the asset. The cost of the asset can be recovered over a longer period of time, then the requirement for a subsidy is reduced. We are trying to work with the industry to say, look, if the UK Government does not come forward with a more supportive environment, what else can we do? We have invited comment around the potential role and remit of a Government-owned energy company and the role and remit around renewable energy bonds as well to see if there are other ways in which we can finance projects. We are always open to constructive input from the industry as to how the Scottish Government can influence this, but we are continuing to push the UK Government to come forward with more positive policies that accept that there is a stronger case in Scotland for supporting renewable projects. We have the fortunate position that sites in Scotland, by virtue of the fact of having a higher average wind speed than many other parts of the UK mainland, particularly on our island with the remote island wind issue, are at present. We know that we have efficient sites, which are very competitive. If there was a CFD auction, which was a zero subsidy one, we are very confident that Scottish projects would do well on that because they are economically very strong projects from an efficiency point of view. The other area that, with your patience convener, I can just mention where we do need a more supportive environment is around transmission charging, because that clearly has a big impact, not just on, as we have seen with the premature closure of Longannock, but also with the renewable industry. It has a profound impact on the ability to compete in an auction process if there is an unfair charging regime for projects in Scotland that are paying a higher price, perhaps reflecting an older model of electricity generation, which is about big thermal plants providing power, exporting it to England and other parts of GB. Okay, with just a final question, convener. You have listed quite a number of things where we need the UK Government to change policy or whatever. Is it just the question that we are hoping to get all of these, or are there some areas that you feel is more of an open door and some of those that you have listed are more of a closed door? I could have gone on to other areas like Tidal as well, but I am conscious that I am meeting into your time. However, there is indeed a long list of areas where we have asked for a more supportive position from UK ministers. It was very helpful indeed to have the debate in the chamber recently to get strong support for Scotland's renewable industry from around the parties in the Scottish Parliament to put a message forward that we need UK ministers to listen and to try to be more supportive of the industry where they can be. We are not expecting a free lunch, but we know that consumers ultimately pay for the electricity that they buy. However, when you see the context of a very strong commitment being given to Hinkley, a new nuclear power station with a long-term commitment at a price that is higher than onshore wind is already providing to the grid. It is already at least a 10-pound differential between the power that is being purchased in 2025 from Hinkley C power station compared with onshore wind, which, in the most recent CFD auction that it competed in, is coming in at £82.50. Onshore wind is already cost competitive. What we are trying to see is a common sense argument to UK ministers. Support these industries, support their development where they are supported by many communities in parts of UK, not just Scotland, allow that to happen and you will be diversifying the risk of higher prices, but you have a nuclear commitment at a stronger electricity strike price and mix that with technologies that are onshore wind, solar and other technologies. I am confident that offshore wind will also come down significantly in price and, ultimately, tidal and wave slightly further down the line. We are trying to encourage the UK Government to look at that and to make sure that it is taking full account of the trajectory in which those technologies are and that they are on the cost reduction trajectories. If they back those industries and get economies of scale, we will see significant reductions in cost. We are seeing it with offshore wind right now. Some sites in Netherlands and other places are coming out well below the target prices that the UK Government has set through its CFD auction process. It is happening, and it needs to back those industries and reap the supply chain benefits that come from that. We have commissioned nuclear power, nothing against using technology from abroad, but we have the ability to support domestic industries, whether they are tidal energy or offshore wind. Why are we not? It is a guilt-edged opportunity to generate jobs in fabrication, as well as to generate the electricity from a sustainable source. Thank you, convener. I was curious about energy efficiency measures, which we are coming to now. The goal for residential energy efficiency is, I think, 6 per cent reduction in heat demand. It is smaller and slower than getting all homes to an EPC C rating by 2025, which is what the fuel poverty forum recommended. Are you not accepting their recommendation? We are very supportive of improving the energy efficiency of our stock. Let me make no bones about that. We are trying to deliver a pathway that is cost-effective and deliverable. We have had challenges in recent years in trying to move to basically when it comes to new-build stock, to try to convince house builders during a very tough economic climate to make that leap of faith and start moving towards higher and higher energy efficiency standards for new-builds. We can work with industry to achieve that, but we have a very big challenge with existing building stock. We have done very well in terms of roll-out of the energy efficiency measures in terms of cavity wall insulation and more traditional insulation products into more difficult-to-treat properties, rural properties, solid wall construction and, in combination with the need to address that, if we were to go purely for making the building stock itself energy efficient to a standard, that might eliminate options that might be more attractive or cost-effective for a particular building. I have seen myself in places such as Inverclyde where projects can have in terms of district heating and reducing the cost of energy to residents' tenants in a large high-rise block. We need to have a sophisticated enough approach that can take account of the context in which we are trying to achieve the energy efficiency measures. I am not resistant per se to what is being pushed for in terms of improvements, but we have set out in the energy strategy that we have been making steady progress in terms of the average energy efficiency rating of our building stock over time, but we need to try to take a more balanced approach. It sounds as if you are not going to go for that recommendation, although you are not resisting it. It is slightly different to being wholeheartedly in favour of that. I would not want to shut anything down. This is a draft energy strategy, and we are listening genuinely. If the committee and the industry feel that it is achievable and they are able to convince us, we will certainly be keen to listen to that. I suppose that, if you have gone for this 6 per cent energy efficiency target, do you think that that is sufficient to end the poor energy performance of homes? In and of itself, no. Obviously, we need to invest in roll-outs of energy efficiency measures. Targets in themselves are just a means of measuring progress. We obviously need to back it with investment, and that is why the SEPA is a national infrastructure project. In the budget, if it passes this week, there is over half a billion pounds committed in the period up to 2020 to roll out provisions in the SEPA process. Obviously, we are looking beyond that, so it is a multi-billion-pound programme over a period over more than one decade to achieve the kind of quality of building stock that we think that people of Scotland deserve over a period of time. We want to work with not just domestic properties but also non-domestic properties, too. That can be very challenging, and, indeed, in encounters that I have had in our new towns, because of the East Kilbride and other locations. We know that buildings have been built at roughly the same time. You have a huge number of non-domestic properties that are in need of investment in energy efficiency. That is both a problem for those local authority areas, but also an opportunity in that you might learn something through being able to roll out a programme with relative efficiency over a larger number of building units because they are all of the same type. You can learn a lot from doing the first one to make an efficiency in economies of scale of doing subsequent ones. Obviously, we have a consultation, which is live, around the SEPA. We are looking for input from industry and, indeed, stakeholders such as Poverty Alliance and others to see how we can achieve our goals. I may be wearing Cathie Robertson, and, if there is anything that you would like to say on the technical parameters around the target and the deliverability of the energy rating. On the EPCC, at the moment, we have achieved two thirds of our residential properties already at that level. As the minister mentioned, the next tranche of that is much harder to treat than in the rural remote areas. Alongside the energy demand reduction, there is also a big challenge in terms of ensuring that particularly vulnerable people have the best energy prices and are paying a fair price for their energy. We are looking at smart technologies and smart meter roll-out and trying to make the best of that. We are not very good at switching in Scotland, so we are trying to encourage more switching to get the best energy prices alongside improving the demand reduction on the properties. The real test will be whether we actually improve the energy performance of these homes because you can do all these measures and people still remain in fuel poverty. One final small question, convener. We know that a lot of the problem, as well as being in rural areas, is in private sector stock, particularly private sector rented stock. Are you intending regulations because it is a bit vague as to both private sector tenants and private sector owners for that matter? I wonder whether you could expand on your plans. We will certainly recognise the problem. Like many members around the table, we represent a rural area. It can be very challenging where it might be easier in some urban contexts to work with large-scale landlords, such as registered social landlords and councils, to roll out a large-scale wide-scale programme. We also have the issue of owner-occupiers amongst that estate and private rented properties in that context. It is more complicated than I am presenting, but a rural context is very much more dominant of private rented accommodation, as you quite rightly say. What we have to do is look at a mixture of where possible. Perhaps regulation is a way of driving that. We also have to be proportionate about it and bear in mind affordability, but we do have the benefit of taking a strategic approach in the long term as we can take a very long telescope if we like to look at where we are trying to get to and bring people with us over a longer transitional period, so that it is not an overnight thing where people are having to do it straight away. People on an annual basis or longer term intervals will be upgrading their properties and investing in their properties. If they know that they have, by a certain period of time, to get to an energy efficiency standard, then that gives them a long deadline if you like that they can achieve and hopefully they will be able to develop an approach to that approach, which gets them to the destination point in a cost-effective way. There is a mixture of regulation. We will consider that, and that is something that we are looking at doing and also working with local authorities to look at local heat and energy efficiency strategies being developed. There is a separate consultation on that issue to invite COSLA and other local authorities and wider stakeholders to give us their thoughts on the impact that that might have in terms of helping support development of district heating, making sure that we connect up large industrial sources of heat to provide local district heating opportunities, which clearly we would also be encouraging where possible, order occupiers and private sector landlords to get involved in that to be part of that. It certainly makes sense if there is a mixed tenure block for everybody to be involved in benefit from any efficiencies and procurement at that point, rather than having to do something separately, which might be a bespoke solution much more costly for them. We will try and work with energy suppliers to encourage them to be involved in it. We have also in parallel with that the roll-out of smart meters. We will certainly accelerate once we have SMETs 2m, which are the more technically advanced meters, which allow them to be more attractive to the industry and consumers for switching. There are lots of things happening, but I think that you are right that we may need to try and provide a mixture of a carrot and stick, but be mindful of affordability and giving people as much long-term notice as possible to achieve that. I do not know whether Cathy wants to add anything to that. On the private rented sector, domestic sector, there is a plan to consult on that hopefully next month, and within that an idea of timescales to consult on our occupier sector. When we were looking at the climate change plan, there was quite a lot of reliance on carbon capture and storage, bioenergy carbon capture and storage as a core technology for delivering decarbonisation. Given that in my area, Peter Hedber is leading the way in developing that technology and the funding was pulled by the UK Government. If we are unable to rely on that, what implications will that have? It is very significant. I would say two things about this. One is that Peter Hed is extremely important for the energy supply in Scotland more generally. We are, as I am sure that you are aware, moving towards a decarbonised electricity system in Scotland, but Peter Hed does provide a very important function at this moment in time in providing base load power, which is important, of course, in its own right, but also in its black start capability for resilience of the energy system. It is a very important bit of infrastructure. Clearly, we are trying to find a future for Peter Hed, which would be sustainable in a genuine way with a low-carbon vision for our energy system. We believe that CCS, although it is not universally supported—I appreciate it—is a very important technology, potentially, to allow Peter Hed to continue to provide power for the grid, but in a way that sequester the carbon emissions that come from the plant. That in itself might provide a valuable industry that will help to use, hopefully not prematurely decommission, but decommissioned on gas infrastructure to be able to store carbon dioxide proposed in the central North Sea. Reservoirs have been largely depleted of oil, which could be suitable for storing carbon dioxide. We know from a set-out in the climate change plan that, under section 7.2, we state that the UN Intergovernmental Panel on Climate Change, IPCC and the International Energy Agency and the Committee on Climate Change have all identified carbon capture and storage as an essential low-cost climate mitigation technology. Essentially, the IPCC and other parties are saying that it would cost 138 per cent more to achieve a two-degree scenario without carbon capture and storage. We think that there is a common sense point of view there. We have got the opportunity, even if I suspend my own political beliefs for a second, at a UK level. There is an asset there that can be used. The infrastructure is there to be used. There is a power station that could provide the power but also do it in trialling CCS technology. I certainly share local people's disappointment in Peter Hed and indeed your own disappointment that the plug was well and truly pulled from out of the plug hole by the UK Government in that respect. Of course, that came after a long gannot, having originally had its hopes raised that it was going to be a site for CCS. It is the cause of chopping and changing in terms of UK policy position, which is destabilising. I do not think that it is appropriate for us just to sit and expect the world to develop a technology that we can then exploit in a situation where we have a guilt-edged opportunity at Peter Hed to do it. If we do not do it, there is a risk that some of the offshore infrastructure, as mature fields are decommissioned, will be lost to us. There is a timing issue here as well. I think that there is an imperative to get the technology up and running and to contribute in the way that IPCC and international energy agency believe it shall in helping the world to keep to a two-degree scenario or less. It will also reduce the cost to the economy of achieving that trajectory. For all sorts of reasons, it is extremely short-sighted what has happened in terms of UK policy position on this. As we have seen previously with wind energy, where research funding was pulled from under that and we have seen Germany and Denmark exploit the technology and good on them for doing it, because we have definitely needed the technology. However, that should have been a UK-based industry. Similarly, with CCS, there is an opportunity to develop technology that can help the world to deal with the issue and reap the economic opportunity that comes from that, too. I just hope that they see sense. Given that that research funding was pulled and that we are facing a Brexit situation, does that have an impact in terms of the university research that could be on-going to make up for the fact that that UK funding was pulled from architecture? Ultimately, what we need is demonstration projects. There are different scales of projects that could be undertaken. I might, in a second, bring Chris Stark with the convener's position, because we have looked at what has been done elsewhere. However, we have to demonstrate the technology and, to be able to, like other industries and in the renewable technologies that were referred to earlier, demonstrate how the cost can be brought down as well. It is about making it cost effective. It will not be cheap to start with, and I accept that, but it is a worthwhile commitment. Ultimately, it will help both the UK and the Europe, and the wider world community to achieve climate emissions that we need to make. Clearly, we are very much supportive of renewable energy, and I want to stress that. We are pushing renewables in a big way, clearly, when they are in Scotland, and encouraging the UK Government to do more than they are on that. However, I do think that the UK as a whole needs this, and Europe and the wider world need CCS to be deployable, where there are many countries around the world that will not have the renewable energy opportunities that the UK and Scotland have. What is their solution? What is going to be their solution to lowering their climate emissions if they are reliant on either fossil fuel-based fuels for energy generation? We need to help, and we have a vital role to play in that. We can also generate export earnings from the knowledge, expertise and technology that we build up, but you are right that access to European funding is very important across all areas of energy research and development. We have performed very well in attracting funding from Horizon 2020 and other European funding sources. Our universities are foremost among the academic community in Europe and are leading on areas such as marine energy, but also in areas such as CCS, where academics at Edwin University and other institutions are very proactive. If I could maybe bring Chris Stark and Camila just to add to that. I am not much to add to that, but I do think that it is credible that carbon capture and storage can play a part in the future. We were all stong by the decision to pull the funding for the competition, which we were very hopeful that Peterhead would benefit from. You see in the energy strategy, in particular, our reflection of that. We are looking at small-scale demonstrations, at least in the interim, but with a clear view that that should grow to something in the 2020s and 2030s that plays a meaningful part of the energy system. It is essential, though, that we work with UK Government on that. There is real stuff going on at the moment, so we have put real funding into real projects in Scotland for CCS, and we will be contributing to the consultation that the UK Government is running at the moment on its industrial strategy to make the point that carbon capture and storage should be a meaningful part of that in the future. You are obviously involved in the times modelling that, if CCS were taken out of the equation, what would that effectively mean? We can manage without CCS, but it will cost us more. If you think of modelling as the primary issue for the model, it is to achieve the targets at the lowest system cost. You might think of that as the lowest cost to the whole economy in Scotland. It is perfectly possible to do that without CCS. It is just that we know with CCS that we have the ability to do it at a cheaper system cost overall. It makes sense. The modelling that underpins that is the same model that my colleagues in the UK Government will be using when they think about the future, too, so we would expect the same arguments to apply. Minister, before we move on, Eschleifftig Hulstein, where most of or much of the German renewable wind energy is from, although not always part of Germany is not looking for independence from Germany, do you agree that a stable political system is also helpful in this area? A supportive political system is very helpful. I bow to your superior knowledge about the location in Germany of the technology, but I believe that what we have to have—I believe this since before I took this post, because I met a number of key industry players when I was at my first climate change conference in Doha where they were all saying that what had been really attractive about Scotland at that point—this was back in 2012—was around having a long-term commitment and stable policy position on the issue. They had certainty about the Government's commitment to the growth of renewables, the well-known 100 per cent target for 2020, and a very supportive environment around it. Whether Eschleifftig Hulstein comes independent or not, I am not sure, but I am sure that, as long as the supportive policies are in place and the right fiscal and regulatory regime is in place, we will continue to see investment. I think that international prayers recognise that Scotland is among the most progressive administrations anywhere in the world in terms of support for renewable energy, and I think that that is the thing that they are most attracted to. Right. I think that my point was to say that Eschleifftig Hulstein is not looking to be independent, but we will move on, minister, to a question from Bill Bowman. Thank you, convener. I am back to Scotland. Minister, you touched on briefly thermal generation of electricity, and I think that the Scottish Government has expressed a desire to see new thermal capacity to provide, to quote, base load capacity and support the resilience of the electricity system. Now, we have heard evidence that would suggest that the investment is unlikely to come in the near future due to transmission in infrastructure costs. We have also heard from the national grid that they would say that they could meet the peak demand on the UK grid, as they would call it, through the interconnections that are either in place or shortly to be in place. Given that, why is new thermal capacity considered to be strategically important? Under what scenario would you consider Scotland to need this new thermal capacity? The first thing to say is that we have thermal capacity at Peterhead, and we would like to see that. Obviously, there has been a capacity auction that has been unsuccessful from the point of view of the operators, and they have been unable to secure a contract at this point. Our first priority is to make sure that there is a long-term sustainable future for Peterhead, but, as Mr Bowman knows, there are a number of sites in Scotland that are either in the case of Llongannate or Cokkenzie, which have been vacated. In the case of Cokkenzie, there is a planning consent for a new thermal plant, but it is quite right that the transmission charges have been cited as a key reason why new thermal capacity will not come forward at this moment in time. For the reasons that I gave earlier on, whether you talk about pump-tider storage or thermal capacity, we are going to see a growth in requirement for electricity in the Scottish economy as we decarbonise vehicle fleet and decarbonise our heat system. We need to provide reliable, secure sources of electricity. Thermal has a role in that mix. We have never been of the view that we should have a one technology energy supply, so we have always been pushing a range of technologies. As I said earlier, Peterhead provides a particularly important role at this moment in time from a Blackstar capability point of view. We need a range of thermal plant around the GB system to be able to help to kickstart the system and get a grid back of running in the unlikely event that a Blackstar would ever happen, but it is an important part of the mix. Losing Llongannate has been significant in that respect. However, our support of new thermal capacity being established in Scotland, we have put in place measures that would require that to be CCS and are capable of deploying CCS to ensure that it does not become a net addition to climate emissions. The point that Chris Stark was discussing with Gillian Martin regarding the impact of CCS and bioenergy is that it helps us to get into negative emissions for the electricity sector. That is where we have to be in order to deliver on the pathway in the climate change plan to have negative emissions around the electricity generation sector, according to the current mix that we have here. It is important that any thermal capacity is capable of being adapted to that technology to reduce the potential risk that it adds to emissions. However, we face the barrier that transmission charges are unhelpful at the moment. I know that national grids in off-gem are looking at the transmission charging regime, reflecting the fact that we have moved to a different, more distributed electricity generation model now. The current charging regime is perhaps reflecting the old system, where there was a large number of large plants that were largely providing export of electricity to the rest of the GB grid. I will come back on that. The national grid is making the point that it would be unlikely that every generation asset in Scotland would go down at the same time and there would be some residual power there. Plus, they were saying that they had enough through the interconnectors to get it started again. Is that a different technical view that you have? No, I mean that I was not disagreeing with national grids. We do on a day-to-day basis. There is enough power in the grid and obviously we have got interconnection to Europe as well, which from time to time is topping up the energy supply in the UK. We would argue that, in terms of the likes of offshore wind, for example, where we are seeing a lot of development of the coast of England, there is a concentration of good sites. There are cost competitive sites, so we are not objecting to that in principle. It is a good thing, but you have all your eggs in one basket. We need to have a more diverse range of sites. We need offshore wind sites in Scotland and, indeed, we are pushing floating offshore wind for the same reason that we need to have an ability to have. Usually, sadly, although it is a strength in this respect, wherever you are in British Isles, there will be a wind somewhere, so we need to be able to benefit from that when it is happening. The thermal capacity, if there was a problem, as we have seen with nuclear plants in France when they lost a large number of them simultaneously for a common safety issue, and it was precautionary in most cases, but it did hit their supply and they had a shortfall in supply. We have severe weather events that can happen, which can take out interconnectors and grid infrastructure, so you may have issues there. It is quite a complex picture, but I do agree with national grid. In a day-to-day basis, at the moment, we have enough power in the grid, but we need to be able to future proof as we grow our electricity demand in time. We need to be able to provide appropriate backup to that. I think that they were saying that it is not just a day-to-day basis that, as a black star, you have called it, there would be enough. Technically, you would disagree with them, or would you just like to have a thermal plant here? We are doing quite a lot of work with national grid and, indeed, Scottish power and Scottish hydro energy transmissions to look at issues around grid resilience. There is a report that has been commissioned, which is hopefully due to be published in the future, which will lay out the position in terms of the security supply at a GB level and Scotland's place within that. I do not want to prejudge that, but I believe that we need to invest in firstly maintaining Peterhead and making sure that Peterhead is not lost to the GB grid. We need to consider what options we can take forward to encourage CCS-enabled thermal capacity to be established. For that, we need the UK Government to continue to pursue a CCS agenda, but it is important that we consider what we need for the long-term. The situation might be okay now, but we will be seeing electrification, transport and heat. We will need more electricity, not less. That becomes an important issue. Did you say that you were going to invest in Peterhead? As you know, it is a reserved area, but we are looking to work with SSE to see if there are ways in which we can help. Clearly, we want to secure a long-term future for that plant and to work with the company and national grids to make sure that it happens in off-gem. There is a desire to work together on it and we will work with UK ministers in that respect as well. It is a genuine partnership. I hope that the UK ministers see, whether it is Scotland or other parts of the UK, that they need to ensure that there is a resilient electricity supply network there for the future and that they are not relying overly on one technology, whether it is Hinkley or offshore wind in one part of the country. We need to have capability to have a resilient electricity grid for the long haul. We will work with the industry and our counterparts in the UK Government to achieve that. Gil Paterson. It is on transmission charges. I heard what you said. I am aware that the charging mechanism at present is detrimental to Scotland. In a wider context, the UK Government is looking at thermal installations for strategic reasons. If you look at what is coming on board from abroad, the same question could be raised that it would need any thermal, so I think that it is for strategic reasons. In that regard, would the Scottish Government think that you are paid at the present time to connect if you are London or thereabouts, whereas there is a charge when it is further away from London? If it is a wooing that you are engaged in to have a fairer system in the national grid, if that fails, and since we should be looking on the basis of a strategic supply because we are not, as I understand it, in a UK basis able to maintain the levels with any surity. Should that be the case, would the Scottish Government perhaps, rather than invest, consider, since there is chat about the Scottish Government being involved in the energy business itself, consider, perhaps, taking over Peterhead for strategic reasons? We are not there yet. I think that it is important to—I do understand the points that have been made—and the importance of Peterhead that cannot be overstated in terms of Scotland's needs. Certainly for the near future, we need a plant like Peterhead to be providing power for the network and to provide that black star capability. Pumped hydro and other areas are very important to kickstarting those thermal plants to get them up and running, but it is the thermal plants that carry the weight of getting the grid back up and running once it is fired up. It is very important to us that the transmission charging regime—you are quite right that there are parts of England where new projects are paid to connect to the grid, such as the peculiarities of the transmission charging regime, whereas we see substantial costs for plants. I am sure that members will be aware that Longannock faced an annual bill of about £40 million to connect to the grid, which played a big part in its premature closure, and that, although the longer term, we are trying to decarbonise our energy mix as a set out in the energy strategy and climate change plan, that was an unhelpful development in its own right, and it happened so precipitately because of the financial pressures that are caused by the transmission charging regime. Those are points that have been very strongly made by the Scottish Government to UK ministers in the past. We will certainly consider what we can do to support Peterhead. I do not want to prejudge how we go, but clearly we have a very strong strategic interest in making sure that Peterhead is up and running. There is a real risk that the regulatory regime and the transmission charging mechanisms are purely cost-driven, rather than thinking about the socio-economic aspects of what is being provided by the electricity infrastructure of the grid, and clearly we would argue that it would make absolute sense that Scotland has got something like 32 per cent of UK's landmass, but projects that are in that 32 per cent of UK's landmass are, to some extent, faced with an acceptable high barrier to connect to the grid. When you have financial mechanisms, if I go beyond thermal interiors such as offshore wind, and indeed, if there is ever a zero-substitute CFD auction process for onshore wind, those technologies are having to start from a position where they have a higher cost than their competitors in the auction process before they even start to put anything in the ground. They have the transmission charges that are unhelpful in allowing them to compete on a level playing field with sites elsewhere. Fortunately, as I said earlier on, wind sites are particularly good in terms of their efficiency, their capacity factors and load factors in Scotland are higher than in many other parts of the country, which, to some extent, counteracts those higher charges, but for thermal you do not have that advantage. If you are burning coal, oil or gas, then it is the same coal, oil or gas that you are burning somewhere else, you do not have a cost efficiency advantage in that respect to overcome transmission charges that are unhelpfully high in Scotland, but we will do whatever we can within our powers to help maintain the resilience of the electricity system in Scotland. I can assure you of that. I think that you dodged a bullet there, and we have it in my real question in Alaska again. For my point of view, there is no UK grid. It is clearly not with these mechanisms in place, but I wonder if there is any legal impairment on you as a Government to invest in energy. I think that it stops you that we told you back. I will defer to colleagues in a second on the legal aspect of that, if I may, Mr Paterson, but I did not mean to dodge the point previously that you are referring to, so I will just answer that while I have a chance. At the moment, I believe that there is between 5 per cent to 6 per cent capacity margin in the GBA energy grid—the electricity grid. In other words, on bands, we produce about 5 or 6 per cent more than we need, and so national grid are right at peak. You can usually cope, but there has not been a problem to date. In Scotland, in the last year for which we have got figures, we exported 29 per cent of the electricity that we generated, so we are playing a particularly important role in maintaining that capacity at a safety margin, if you like, at a GB level. Scotland plays a particularly important role, so if we are losing plants like Longannot, which has come out since those figures were produced, that is chipping away at that safety margin at a GB level, not just in Scotland but in Paxsonat. We obviously need to address that concern, and we have raised that concern with the UK ministers and national grid, but we want to support the maintenance of such facilities in Scotland, and in terms of legal aspects of whether we can intervene to shore up a particular plant, such as Peterhead. I will now carefully pass the hospital pass to Chris Stark, who may be aware of the legal aspects. There are some barriers to any formal state ownership in any market and most of them are presented in the state aid framework. The other barrier, or hurdle, is the regulatory barrier, so in the scenario that you have presented there, we would have to have a licence to generate and be part of that market. It is worth noting that Ofgem has made an offer to us to consider some of those things. There is a commitment in the energy strategy to consult on what we have called a Government-owned energy company, which could take many forms. It is good to have on record that there is a good record of partnership working with the regulator, and we will explore that with them. They have offered what they have called a regulatory sandbox, which is a good term to consider some of the regulatory aspects. However, the short answer to your question is that it is possible. We will move on from the sandbox to questions from Andy Wightman. There are three questions on residential and heat. Residential is targeted to have a 76 per cent reduction in emissions by 2032, but areas such as transport and agriculture are taking much less strain, and yet by 2032 we will have 33 per cent and 26 per cent of emissions. Given that transport and agriculture in particular have been predicated on inputs to the times model and constraints that have been placed upon expectations of, for example, demand reduction in transport, to what extent are we placing unreasonable expectations on the residential sector to reduce carbon emissions? I recognise the issue. I think that in times, I will ask a stark and mic to comment on the times model. I do not think that agriculture is picked up by times. The analysis has to be done separately from the times model, because it is primarily focused on the energy aspects. It is difficult to model that respect. Obviously, agriculture itself, if I was here, would tell you that it has been on a steady diameter trajectory in emissions, so we need to continue that in the period of the climate change plan. On the residential side, I hope that we can present a scenario in which we are delivering climate change emission reductions in the residential sector and doing it in a way that helps to save people money and make people less exposed to fuel poverty. Through the points that Jackie Baillie has made earlier on around SEP and tackling the energy efficiency of our housing stock, and indeed helping our business community to go beyond the residential sector into non-domestic, helping businesses and individuals residents to improve the energy efficiency of their housing stock and become more fuel-efficient obviously and therefore save them money and obviously improve their health and other benefits that come from having a warm, dry, well-heated home. That is very important. We are trying to find ways in which we can encourage people to be part of this. We have had some successes in recent years in terms of the work that has been done around the behavioural, low-carbon behaviour framework by the Greener Together team in the Scottish Government. We are looking at how we can incentivise and encourage people through good practice, if they like, to do the right thing. Currently, we are going to have to—in residential sectors that are purely dealing with us—the properties. We have also got the transport side of it. We are going to have to encourage individuals to change their vehicles to lower-emission vehicles and try to find a way of encouraging that where we do not have to direct fiscal tools at our disposal but we can provide incentives and provide the infrastructure to support the network of infrastructure or charging points to support the roll-out of electric vehicles. We are going to have to be quite positive in how we try to encourage individuals and householders to lower their emissions. We recognise that it is a pretty heavy challenge but we always knew that it would get more difficult as time went by. The importance of achieving the target cannot be understated because if we don't, the impact on our environment and indeed the global community could be devastating. It is a mixture of trying to encourage people to do the right thing but we need to try and provide a cost-effective way to do it and helping private householders. The consultation that Kathy referred to, we will try to unpick that in terms of private rented householders, how we incentivise them to get part of the roll-out of energy efficiency programmes and make it easy for them to be part of it if we can do so. I will move on to my second question on heat. Policy outcome 1, under residential, says that the Scottish Government wants improvements to the fabric of Scotland's domestic buildings results in our 6 per cent reduction in their heat demand by 2032. My understanding is that 6 per cent reduction is a 6 per cent reduction on the forecast demand in 2032 as opposed to a 6 per cent reduction on any baseline demand figure. Can you clarify what that means? If I may be bringing Kathy here because I know that Kathy will study the figures more carefully. I might pass that to Margaret. I think that that is based on where we are now moving forward to 2032. That is a 6 per cent reduction from the starting period to the period in 2032. It takes account of the demand drivers as well that are driving demand in the residential sector going forward as well. With respect to demand, today is an index of 100 in 2032, and the demand will be 94. Fabric measures will reduce overall demand by 6 per cent on 2032 levels. What is that forecast 2032 demand? I do not have those figures with me, but we can certainly write about that. That would be extremely helpful, if you could do that. The residential carbon emissions reduction relies heavily towards the end of the period on technological solutions. In our PP2, the last plan on low carbon heat technology, it said that we intend to produce a detailed proposal on how we realise that potential in our PP3. This is our PP3 in effect. Tables 8.7 in your climate change plan here says that we will look to put forward a more detailed proposal on how we will realise this potential in subsequent climate change plans. Are you ever going to do it, given that your commitment was to do it in this plan? We are. I recognise the point because I was involved with our PP2 last time. I know that we faced the challenge at a point in time that technology was not there, but we knew that research was being done. We have a lot of work being done through the LCITP and the SEAP programmes to pilot technologies, and there is some really good work going on. I have visited a project just covering Edinburgh, East Lodian and Midlodian, involving Sunamp, which is a business-based in East Lodian, which is providing heat battery storage. There are really big steps forward being taken. There are a lot of properties these days where company boilers do not have storage capacity for hot water, so being able to store heat in another way is a space-efficient way of doing it. There are companies like that, which we are supporting to try to take forward new technology. There is significant funding going into research and development in this area to reassure Mr Wightman. I would hope that we can develop technological solutions, but we will reflect on the point that he has made. If we are mis-cunning him, we can come back with any further detail, and that will be helpful. I do not know if the conveners can bring in Cathy to see if there is anything further that we can see on that just now. The energy strategy that is associated with the climate change plan is also consulting on SEAP and, in particular, heat. It is specifically looking at two aspects of heat that are not particularly against one technology against another, but looking at regulation for district heating and also local heat and energy efficiency strategies, considering that local authorities might, in their own areas, understand the demand supply and be able to zone particular areas for particular heat technologies. I think that, in the context of the climate change plan, the focus is between now and the mid-twenties on, as I mentioned earlier, on demand reduction and low-regrets heat solutions. In off-gas grid areas, individual solutions such as heat pumps for individual buildings or in high-density areas, district heating where that makes commercial sense regardless. Until that point, we are not going to be sure what is going to happen in particular to the gas grid and whether there are going to be any options around repurposing or greening the gas grid. We want to be very sure that we understand what will be happening across UK before we push people or businesses into taking out one particular technology and then they have a stranded asset or become regretful for making that choice. It is fair to say that, in our heat statement, which we published last year, we are very clear that all technologies are going to be required, so we will actually need everything in relation to heat to make our targets. It is that specific focus that you are looking for. As far as we can go, it is 2025 on district heating heat pumps and one or two of the other tested technologies at this point in time. We have a short supplementary from Gordon MacDonald before we move to Ash Denham for further questions. Perhaps in light of time to try and perhaps keep answers a bit more focused and, of course, there will be an opportunity to write in about any issues that there has not been an opportunity to perhaps cover as fully as the minister or those with him might have liked to, and I think that the committee may write to clarify one or two areas as well. I will come to a short supplementary from Gordon MacDonald. Thank you very much, convener. I just wanted to ask about how realistic the transport target of reduction of 31 per cent between 2017 and 2032 is bearing in mind that the latest figures from the Department of Transport say that the ultra-low emission vehicles that were purchased in 2016 is only 1.2 per cent of the total. Given that much of the responsibility for regulation in this area either lies with the UK Government or with the EU, I was just wondering how realistic you thought that target was. It is going to be challenging and I think I noticed that earlier on. Mr MacDonald is quite right to identify that we have different Governments involved in different, indeed, EU as well have a distinct role in oversight over emission standards. What we are seeing around Europe is quite a significant move now by different even cities within countries such as Paris that set a target to ban fossil fuel cars from its environment by the mid-2020s, but we can check that and come back to the committee. There are countries such as Norway that have already achieved, I think, an approaching 25 per cent of new vehicle sales are now electric vehicle or hybrid. There are significant steps forward, so, yes, I admit that the UK figure is indeed with Scotland within it, the take-up of electric vehicles is lower than I would like it to be. We clearly want to see a significant step forward in that over time. We need a supportive UK policy environment for that in terms of fiscal incentives, and, thankfully, there is at least a fiscal incentive. We top that up. I might check with colleagues exactly at the margin, because I cannot recall the figure, but there is a loan fund that is available to provide a very attractive rate of interest loan to help people. I think that it is up to £35,000, but I might check with colleagues about that in terms of the cost of electric vehicle. We actually help people to loan funds, but there is also support on top of that from the UK Government in terms of an incentive to reduce the overall price as well. We are trying to help to support increasing sales, and we have an aspiration to get more than 40 per cent of sales by the end of 2030. I think that that is not unrealistic given that Norway is already into the 20s. We just need to have both the UK and certainly the Scottish policy working in concert to achieve that. Hopefully, with the roll-out of the rapid charging infrastructure as well, which is going very well, we can provide infrastructure. People need to be able to use that fleet with confidence and know that they have not got range anxiety about maybe not being able to complete their journey. That is largely with provencent battery technology becoming a thing of the past as well. We will see step forwards over this time period in the technology itself, so people have the confidence to be able to drive the similar length of driving range that they do now with a fossil fuel car. By that timescale, I would anticipate big strides forward in battery technology, but we will also have the infrastructure in place to support people where they need it to charge as well and hopefully a supportive environment in terms of the cost of buying a vehicle or leasing a vehicle as well. I want to ask you about decarbonising domestic heat. Obviously, the objective is that by 2032, 80 per cent of domestic heat will come from low-carbon sources. Obviously, we know that at the moment, 80 per cent of households are using gas and only for heating and only about 2 per cent are getting their heat from lower carbon sources. With that objective, by 2032, you are wanting that to effectively reverse that position. That is obviously really ambitious. I was wondering if you could outline what you see as being the mix. How much from electricity, how much from hydrogen in the gas supply, or zero heat homes, or how would you see it? It is a very important question. That is probably one of the most important in there, because the general thrust of the draft energy strategy is largely to try and achieve the scale of ambition that we have delivered on electricity with heat. Over half our energy consumption at this moment in time, 54 per cent, is heat. It is a huge issue for us. We recognise that we need to deploy different technologies and different solutions in different areas of the country. Indeed, at a coventure of Highlands and Islands yesterday, stakeholders were saying that we need the flexibility to be able to deliver solutions that match our circumstances, building stock, the rurality of the location, the access to infrastructure, and not everywhere that has a gas grid to start with. Those are all inhibiting factors, so we have to come up with solutions. In some cases, it may be electrification of heat, where it is not already happening, so moving away from solid fuel perhaps to electrified heat. In other cases, it will be district heating solutions and the consultation that both myself and Kathy have referred to around the regulation, potentially, of district heating market. I should say for the record for the committee that in interaction with industry, there is extremely strong interest in district heating in Scotland from investors. They see London and Scotland as the two places to go to in terms of the UK for investment in district heating, so there is the right combination of, in the case of London, the Government there and, in Scotland, Government support for that. The regulatory environment is emerging, so they have some confidence that there is an appropriate mechanism to help that to happen. Potentially, in Scotland's case, it leads very strong partnership with local government as well to make it happen. I assure the strong interest in COSLA on this agenda as well, but I just want to put on record the strong investor interest in it too. We can see substantial investment in district heating, but that will not cater for the majority of properties, so we need to be realistic about that. Hydrogen, in the longer term, has real potential to replace domestic natural gas. It is a real opportunity for all-in-gas industry and other players to get involved in that. That is one of the reasons why we have got so firmly a commitment in the energy strategy transit that the oil and gas industry have a role in the low-carbon transition. They have the skillsets, the infrastructure and, in some cases, the technology to support this and the expertise in case of natural gas. I had not appreciated before this coming this role to overstate my youth, because I am clearly not as young as I used to be, but before I was even born there used to be town gas, which had hydrogen in it. It has been used before in a domestic context in Scotland, so it may have a rebirth in this role in providing an alternative to natural gas as a heating fuel. We are certainly encouraging people to take part in the SEAP consultation around the energy efficiency aspects, but the consultation that Kathy referred to around district heating and local heating energy efficiency strategies is really important to help us to get industry engagement and what sort of supportive environment we need to make that happen. You mentioned district heating there, and one of the policies around that is the district heating loan fund. That is where local authorities and housing associations can apply for money overseas. Is that many for retrofitting or is that for new builds? Or is that a combination? I am open to suggestions on that. Certainly up to now it has largely been about retrofitting, but there are, in my way, some proposed projects where there is a mixture of a new development happening and adjacent. I have met one potential developer that was looking at it. It is indeed where an existing development might benefit from the roll-out of a district heating package that could then benefit those other households. I have tried to encourage the industry to look at those opportunities where there are new builds and to design that in and to think about how they can benefit the existing community. It is also a bit of a positive for a development happening there to get a positive benefit to them rather than just seeing a new housing estate plonk next to them and no benefit for the existing community. I think that there is a lot of upsides to that. We are certainly not against that in any way issue before. Indeed, we would encourage it, but I do not know where our cafe has got any. We heard that the loan fund, the take-up, has been a bit lower than expected. I was wondering what your comments would be as to why that was and if that is a concern going forward. We are certainly funding innovative projects in this area under a number of different headings. I think that the LCTP and the SEP, as well as district heating loan fund, are all contributing to that. It may be that we are seeing more activity than is visible through the one particular fund, but I do not know whether Sue or Cathy want to comment on the other funds that are being used to promote energy efficiency projects and specifically district heating projects. Innovative district heating is being funded under low-carbon infrastructure transition programme, as the minister said. We are seeing some kind of imitative schemes coming out of that, as well as wider local energy systems funds going in. I think that that is probably the way for the future. When we are looking for innovation, we are not looking for the standard loans. We are looking largely towards grants programmes in the first instance and working towards commercial projects in the longer term. I think that the project that I have referred to earlier, the River Clyde-Holmans, was funded under that route. Tenants spoke to me in a period of three months prior to my visiting. I had a bill that was very modest. It was around £50-70 from memory. It was the entire heating bill for that three-month period, and bearing in mind that was just before Christmas. There were some very happy tenants. I will put it that way. Dean Lockhart I would like to follow up on the point that the energy strategy should be seen as part of a wider business and industrial strategy, which I agree with. Given that, I ask the minister why the Scottish Government is proposing significant rate increases for renewable projects and companies across Scotland. I understand that Scottish Renewables has written to the Scottish Government highlighting concerns about the proposed increase to business rates. In some cases, the increase is fivefold and puts into jeopardy the commercial viability of some of the projects. Does the minister agree or share those concerns expressed by Renewables Scotland? The first thing to say is that the valuations that Mr Lockhart refers to are set by the assessors. I am not denying that there is an important issue here, so I will come on to that. I will make the point that the valuations that have been set are set by the assessors, and then where government comes in is in terms of relief schemes and setting the poundage, as I am sure Mr Lockhart knows. The projects that have significant community component benefit from a relief scheme on business rates, so they should not be affected in the way that Mr Lockhart describes. Very small projects that have a low rateable value will benefit from small business bonus, so there is that aspect. However, I appreciate that there have been some, in terms of the draft valuations that the assessors put forward, some significant, significantly higher valuations. That is something that we have been engaging with the Scottish Renewables and the industry on, and indeed feeding that into Mr Mackay. I know that he is listening very carefully to those concerns and hopefully will be able to address them in due course. We are obviously encouraging any business, regardless of whether it is a renewables business or a wider economy, to take advantage of the appeal process that is available to them between when the finalised valuations are issued in the middle of March through to September to take advantage of the ability to appeal to the assessor if they believe that they have been unfairly tutored in terms of the valuation. Where estimates have been used by the assessor to reach a valuation to be able to use actual data for their project, perhaps to be able to demonstrate that there has been an overvaluation of the asset. I hope that there is a positive option there in terms of the appeal process that already pre-exists, but there is also a hope that we will demonstrate a listening government that is listening to the industry and will hopefully help to alleviate concerns in that area. Just follow up. Given the large-scale footprint of those projects, they tend to have a large area of coverage, and that makes them more likely to be covered by the large business supplement given the bigger footprint. Do you think that that is a fair tax on renewable companies to be subject to a tax that is effectively double the tax elsewhere in the UK? We should bear in mind that valuations and the process that we are going through is exactly the same as in the rest of the UK in terms of the assessor role of coming up with a valuation. As I said, there is a mechanism by which those can be challenged. I do know that larger projects have larger sites and I accept that. There is obviously likely to be a higher rateable value in that situation, but I think that at the upper end in terms of the largest sites there is a smaller increase in the draft valuations for the lower end of the spectrum. What we are trying to do over time is to set this out in the energy strategy. It is also encouraged developers to consider shared revenue models with the community and to engage with the community and to make a genuine look at community ownership options, shared investment, and obviously government helps through reef and carers to help those communities to take forward those opportunities. Where that is possible, they become eligible for rates relief in terms of becoming community projects. There are different ways to attract that problem from the point of view of the developer, but we certainly encourage them to engage with the assessor. I know that assessors would often be willing to meet informally with all businesses to discuss their concerns about valuation and hopefully address them without having to go to a formal appeal, which is more expensive for the business. I know from having been up in Aberdeenshire recently that the assessor there is keen to engage with businesses informally and see if there is a way in which they can tackle the issue. If not, they have always got the right to go through appeal anyway. We are looking very seriously at the issue about how rates interact with renewables. Indeed, Ken Barclay's review has been encouraging the industry to feed into that review during the consultation to make sure that any such issues were taken into account, because the objective of that exercise is to have a rates regime that is supportive of economic growth. Richard Leonard. I have two quick questions on the supply side. I will go back to Ash Denham's question about the 80 per cent to 80 per cent switch, which is a fairly phenomenal change in heating sources. The depiction that has been presented to us by witnesses in previous sessions is that you seem to be jogging between now and 2025 and sprinting flat out between 2025 and 2032. How on earth do you expect the low-carbon technologies industries to build the capacity and to have the skillsets to deal with that kind of schedule? Wouldn't it be better to have a reasonably average speed throughout the whole of the period? Well, I recognise that the challenge is always a challenge when looking at a long-term shift of something as significant as this, but we have to recognise that we have to give a signal and allow the capacity of the industry to build up. We can't expect them to go, if you're not using the Mr Leonard's analogy, go immediately into a sprint mode from day one, or at least a canter, if we can use a sort of mixed speed model. We need to build up the capacity of the construction industry, the skilled trades, which have obviously had a huge contraction in many aspects of skilled trades during the housing recession from 2008 onwards. The industry is taking time to recover, to invest in apprenticeships, to invest in building up the skills that are required to roll out the technology. If we were to rush our fences, if I can put it that way, mixing the cantering model here, we would end up having inflationary pressures on some of the limited industry to respond to growth at the time. That might make it less cost-effective for us to roll out the technology, but we've just touched upon with Mr Whiteman. There's still a degree of developing the technology itself and demonstrating the technology, which is what we're doing through LC, ITP and SEP funded projects. That will help to understand which technologies work best, most cost-effective and have the biggest impact on the households in terms of saving their money and climate emissions. It's not unrealistic to expect that we're going to take a few years before we get up to a position where we've got a steady state industry that can really go on at pace to scale the walls and get us over the target, but we do have to give a strong signal for the reasons that we've touched upon earlier on with Jackie Baillie around some aspects of society as well, whether it's private landlords or private occupiers. We need to give them enough time to prepare for this and to know that there's a long timescale for which they can achieve their objectives. Do you have any forum where you sit down with the industry and the industry's trade unions to plan the implementation of such a transformational change? We do engage with trade unions and industry, probably not in the way that Mr Leonard describes, but we're open to doing that. Certainly, we need to understand the skills aspect, not just from the college sector perspective but from trade unions and workforce perspective. I've given a commitment to Mr Leonard in the past in the chamber that what we want to do is honour a commitment that we gave during the 2009 act when neither Mr Leonard nor I were here in this chamber, but to society that we take them with us on a journey and we don't break the economy in the process of making a transition low-carbon and we have to help employees in the high-carbon areas of the economy to transition to low-carbon. Through the likes of the transition training fund and the oil and gas industry, we are providing training opportunities for people to retrain in fitting smart meters for the electricity system and also to help people to get new skills to be apprentices or to be employed in those areas. I appreciate the point that Richard Leonard is making. In an ideal world, it would be nice to have a sort of smoother trajectory. I appreciate that, but we have a capacity issue to overcome first, so we can't expect the industry to respond very quickly immediately. We've also got to get time for the regulation and other aspects to emerge as well and to be put in place to help drive the market and to allow COSLA and other partners to develop the strategies at a local level as well. I have just one very quick question coming on a different subject. Minister, at the weekend, CS Wind UK announced that they were planning to make 60 people redundant from the plan to macrohannish. Have you spoken to the company or do you have any intention of taking any action? Yes, I have spoken with the company on a number of occasions. Indeed, they were in my office last week in Parliament and we were trying to identify any ways in which we could prevent the job losses. Sadly, I do believe that the company has a future and that it will have a sustainable future. There is a short-term issue that they have had with the sudden changes in policy position in terms of onshore wind, which has dried up to some extent the onshore wind market, and also the offshore wind market, which is emerging, where it is proving challenging for supply chain companies to be cost competitive in the context of a CFD auction process where a developer can lose a bit on the basis of one pence per megawatt hour, which is, in my view, a crazy system to do it. It should be more kind of taking off the supply chain impact on the economy, but we are encouraging UK ministers to be more expansive in that area. We will work very closely with CS Wind in terms of identifying anything that the Government in Scotland can do to help them, including looking at how we can support the supply chain and support innovation, so that we can help the company to become more cost competitive with yards in places such as Spain, where they have significantly more or less state aid considerations in terms of the very high levels of unemployment in Spain. There is a stronger market argument, if you like, for intervention in Spain than we can possibly make in the context of a relatively tight labour market in Scotland, but we are working with—no, that is not my view, that is just the view of the state aid environment that I should stress, but I assure Mr Leonard that we are working very closely with the company as we speak to try to help them and to ensure that we will support the workforce as well, which is obviously very important to the Argyll economy. I thank the minister very much for coming into committee today and also our other guests, and I will close the public session at that point.