 Rwy'n gwaith y fath o'r 12 o'r Niadoletholwydden niolwyr gwneud i'r Cymru ar yng ngyfodol yw 2022, mwyaf i chi chi wrth yr wych yn cymdeithasol. A oedd y gyrfaenau ym mwyaf i'r Prifysgol ac i'r prifysgol, ac i'r prifysgol yn y prifysgol i'r prifysgol i'r prifysgol i'r prifysgol ar y prifysgol, ac i'r prifysgol i'r prifysgol i'r prifysgol i'r prifysgol i'r prifysgol i'r prifysgol i'r prifysgol. That is agreed, thank you very much. Our next agenda item is our first evidence session in respect of our inquiry into increasing energy prices. The recent significant increase in wholesale and domestic energy prices have quite rightly received a lot of attention in recent weeks and are causing real concerns for many people across Scotland. This inquiry will look in more detail at what is causing these price increases what can be done to alleviate them and how we can... How help can best be given to households most in need. Our focus in relation to this global issue which is partly reserved to the UK Parliament and partly devolved to the Scottish Parliament will be on the Scottish Government's powers in this area and what steps can be taken. To discuss some of those issues I'm pleased to welcome our first panel this morning pan john yw elwedd. Rydw i ddadiw Madhu Hannon, gerais cymryd yn gondol ffordd, ac i'r夕b wathlwn yn Cymru Gweithreitrwyng Ffotol Fawr, Rydw i ddweud Fawr Stryth Clyde. Opryd Trifed Gyaf Sledd, Gwyllgor Ffynigperfynedd, Ffyniggr Cyfwyr, ac Gweithlodd Ffynigr Feikledd ar gyfer, Aligwysigol Ffaruagol Ni Lywol Siweigol, Ffynig Grwyr Pwyd Llyfr, ac Rydw Ildew Llyfr Richard Llywr, Ffynig Grwyd Llyfr, associate the regulatory assistance project. Good morning everyone, thank you very much for joining us this morning. It's a pleasure to have you here. We've got around 70-75 minutes allocated for this panel session so we will move straight to questions and I will begin. As I said, in recent months we have seen significant increases in wholesale energy prices and as a consequence domestic energy prices as well with a number of different factors contributing to this upward trend in energy costs. It would be good to get the panel's views on the general sense of direction of energy prices in the short term, medium and longer term. In other words, what does the panel see happening with energy prices over a short term, medium term and long term? I appreciate that. That's a very difficult question. No one here has a crystal ball, but I'm sure that you all are monitoring developments on the supply and the demand side and also keeping close tabs with what's happening in the market. To the extent that you can, it would be great to get your sense of what we could expect to see with energy prices going forward. In terms of putting that question to the panel, perhaps I could ask Dr Hannan to go first, followed by Tim Lord and then Dr Lohes. Dr Hannan, over to you if that would be okay. Thank you. Many thanks and good morning to the committee. No, it's a very good question. One, I've certainly given a lot of consideration to. Some of the analysis in terms of energy prices going forward and how the market is going to react, I think it's fair to say some of the leading commentary has been from Cornwall insights. The consultancy there is pointing, I think recently just a few days ago, released analysis suggesting that they don't foresee a great deal of change within the next couple of years. So, their assumption is that the price cap come October will rise again. At that point, we will see a rise from just shy of 2,000 that we saw. The average dual fuel electricity and gas bill paid by Diolch Debit just shy of 2,000 pounds going up to roughly 2,600. They got it pretty spot on last time around, so I would certainly sit up and take notice of their forecast. Their headline, I guess, is that hopes fade for a significant price cap drop in 23 and 24. The main driver being that they don't expect wholesale prices for energy to drop anytime soon. I think we can expect in that short term period over the next two years to brace ourselves for record energy prices. I think that the medium to long term, there's probably two key factors which I expect will start to set the scene for whether we see bills starting to drop. That's the extent to how quickly we start to decouple our energy consumption from gas, that's both for power generation but also for heat. I think that associated with that is some of the difficulties around decoupling wholesale electricity prices from gas more broadly. Even if we aren't consuming much gas, the price of gas will dictate to a large extent the price of electricity. The other key factor here and the key trend, which for me is most important, is the extent to which we can drive forward on energy efficiency, particularly fabric first approach. Scotland and more broadly the UK are not going quickly on this and we've seen from government support programmes such as the energy company obligation that we are certainly versus this time 10 years ago, we have slowed down significantly. It was interesting to see this morning for instance just looking over some of the data around how much Scotland had achieved in terms of loft insulations. If we take the period 10 years ago of 2011 to 2012, we were insulating roughly a quarter of a million lofts through the energy company obligation or its predecessor that between 2018 and 2019 that was just 5,000 lofts. In the context of an unprecedented energy crisis, we really need to step up our ambition and to exercise whatever devolved powers we are able to muster but also to work alongside the UK Government to ensure that the scale of ambition with regards to retrofit is up to the job in terms of the crisis that we face and that ambition meets the scale of the challenge. Thank you very much, Dr Henry, for that comprehensive answer. You set the scene well and I'm sure we'll pick up on a number of those points. Same question to Tim Lord, please. Thank you and thanks. It's a pleasure to be here today. I think that I agree with a lot of what.down but a couple of points to add. The first thing to say is that it's worth repeating what's driving these high energy prices. It's essentially high gas prices and high fossil fuel prices. Why is that happening? I think that there are three main factors. The first is the demand recovery post Covid. It's worth remembering that, although the Ukraine crisis has clearly exacerbated the situation in international markets, the increase in prices does predate the Ukraine situation. Secondly, supply shocks are varying in particular as a result of the Russian invasion of Ukraine. Thirdly, we have insufficiently strong investment signals in energy production. I don't simply mean fossil fuel but more broadly, and also in terms of demand signals for energy reduction, as Dr Henry mentioned. To address your question directly, what's going to happen to forward prices? Forward prices are very, very difficult to predict. We've certainly learned that this winter, the UK Government estimates that forward gas prices had a high scenario of around 75 pence a firm for gas. We've seen prices well above 200 on average and peaking into three or four hundred pence a firm, which is off the charts in terms of predictions, but those predictions were not outliers. In general, what we've seen in markets has far exceeded what anyone predicted, so I'd be cautious about making forecasts. Having said that, some of the issues that we're seeing are structural and are likely to persist. Secondly, there's the question of how high prices are going to be, but there's also the question of volatility. What we are very likely to see in the next few years is much more volatile prices in international fossil commodity markets. In some ways, that's as big a problem as high prices in the sense that it's very challenging for investors and very challenging for consumers. The energy bill is really the only one of the major bills that we have, which can change quite dramatically from one period to the next, which obviously is a huge problem for consumers with constrained budgets trying to budget. In terms of what we do about that, I mean, no doubt we'll come on to this, but very quickly, there's basically four options. We can increase the supply of fossil fuels. In my view, that won't have a huge impact because of the UK's relatively small role in international markets and because of the timescales associated with that. We can reduce demand, as Dr Hannon mentioned, which can both reduce costs in the long term but also help in the relatively short term and directly help some of the consumers who most need it. We can move our supply away from fossil fuels to reduce that dependence on international market through investment in renewables and so on, and we can provide direct financial support. Any strategy basically has those four clubs in its bag, as it were, and the question is in what combination do we use them and how do we use them in a way that ensures that we're helping to address the price rises in the short term, as well as make us more structurally ready to manage them in the long term? Great. Thank you very much for those insights. I think you anticipated one of the questions we had in terms of how to deal with some of these challenges. Dr Lowe, same question to you, please. Good morning, everyone, and thanks for inviting me to be here. I agree with everything that's been said already, really. As Tim pointed out, there are two things that came together to produce what was a perfect and unpredictable storm, the post-Covid bounce back, and then the Russian war. A huge amount depends on what happens with both of those things, so does growth keep going, and we're seeing fluctuations around the world with that, but the big impact locally, at least because of our links to the European market, will be the war in Russia and the war in Ukraine in the terrible situation there, and it's difficult to predict how that will play out, I think. In terms of prices, you should never ask anyone to predict energy prices in the long term, certainly. In the short term, I think the key thing to note is that people haven't started feeling the pinch yet, so although the prices, the short-term fluctuations in the gas price, which went up to huge numbers in October and more recently, people haven't really felt these bill impacts yet, and so, while we roughly know what the bill impacts will be, people's direct debits may only have just gone up, prepayment meter prices have only just gone up, and it's been a mild winter, and so a key issue is, in the short term, the prices, we know what they are, they're high, they're about possibly double what they were last year, and can people pay their bills? That's the biggest short-term price issue. In the medium term, the gas futures market still looks very high, so we're not likely to see any let-up, I don't think, before the end of 2023, looking at most of the predictions and forecasts that I've seen, so that's at least a year and a half of struggle and high costs, and beyond then, it really is a question of who knows, I'm afraid. We know what's cheap, though, so we do know the things that are cost effective already, so we know, for example, that insulation is cost effective, we know that renewables are very cost effective, and the biggest price impact, I guess, over the long term is that everything that was already cost effective for meeting net zero, whether that be onshore wind, solar efficiency, heat pumps, electric vehicles, all of those things are now relatively cheaper, and there's a financial question there about how you allow people to reap those benefits or those relative benefits, but, basically, short term, it's high, medium term, it's high, long term, we don't know, but a sensible strategy would be to eliminate or certainly to reduce your exposure to fossil fuels as much as you can, and that's gas and oil, because both prices have come up significantly. Thank you very much, Dr Lewis. The panel has certainly set out a great number of issues that the committee members will want to explore. My follow-up question is about the policy response. What would be the best policy response you would like to see from the Scottish Government and the UK Government to deal with the short term, medium term challenges, as well as those longer term structural issues facing the sector, bearing in mind, obviously, the overriding priority of reducing climate emissions? I think all of you mentioned managing demand and the ability, perhaps, in the short term, to address the demand side of the equation, so I'd appreciate some thoughts on that. In terms of putting the questions to the panel, perhaps, Dr Hanan again, then Tim Lord to be followed by Dr Lowe's. Many thanks, yes, another excellent question. I think in my mind there's two objectives, so there's no point in setting policy without a clear objective in mind, and the objective should be twofold, I think, apart from reducing carbon emissions, just in terms of cost alone. One is about reducing overall costs for the system, and what I mean by that is the cost that the average consumer faces in terms of satisfying their energy needs. That's a domestic customer, that's about the comfort standard of living, if it's a commercial customer it's about what it costs to operate on a cost-effective basis. The other objective here is around a just transition and around who pays and how much these different segments of society and the economy pay. In that round, I think the first objective about reducing the overall cost, obviously we've spoken about demand reduction, but it's also about bringing online the cheapest forms of power, which Dr Lowe's points out quite rightly, and not obviously with onshore, solar, increasingly offshore. We need to do all we can to bring those online, and that isn't just about subsidy regime, a planning regime, a consenting regime that encourages that, but it's also about having the networks in place to transport that power reliably and cost effectively cheaply from areas of high supply to areas of high demand. I think that point about who pays is a really important one, and particularly the issue around how we raise policy costs. Now there's a fantastic piece of research undertaken by colleagues at the university of Leeds, Anna Owen and John Barrett, that looks about how we raise costs, cover these subsidies and typically we do this for energy and climate change through our energy bills. We raise this on bills and as a levy, so many of you will be aware of that. They look at different ways in which we can raise funds, and one option that they explore is through general taxation, which obviously presents a more progressive way of doing this because the highest earners pay proportionally more towards covering those costs. There's also a question about how we balance those costs between gas and electricity bills. I certainly know that UK Government is actively exploring shifting those costs, which are typically higher on electricity bills, as green levies, on to gas bills. That might help to tick the carbon emissions box. I know that Dr Lose has explored this with colleagues in the past, but it may also start to increase the cost of those on gas, and many of those homes may be fuel poor. I just want to present to the committee that there are two objectives, reducing overall cost and then asking the question of who pays and how do we pay for that in the most progressive and fair manner. Thank you. Thank you very much for that, Dr Hannon. I know that some of my colleagues are going to address some of those issues after me. The same question to Tim Lord, please. Sure, thank you. I think that just building on that point about objectives, in the relatively short term, what are our objectives? We need to get prices down in a fair way, as Dr Hannon says, and secondly, we need to reduce our dependence on commodity markets. I think that it's worth pausing to think in the net zero context what would you do differently as a result of that. I think that if there is only one thin silver lining around what is happening at the moment, it is that the things that you need to do for net zero, and obviously Scotland has more ambitious net zero objectives than the rest of the UK, are exactly the same things that you would want to do in order to achieve those objectives in the context of this energy crisis. The second point that I have made by way of purpose is around investment. We have a huge investment requirement across energy supply and demand. UK-wide, the Association of British Insurers, estimated that as £2.7 trillion to 2035. That probably equates to something like £2 to £300 billion in Scotland alone on a population basis, perhaps a little bit higher, given Scotland's capabilities around renewables, etc. A crucial point is what are we doing to enable that investment to flow, and that includes everything from the very largest offshore renewables projects to people installing insulation in their homes. Just to address your question directly, it is worth breaking down into short, medium and long term. In the short term, what can you do in particular for the coming winter? As Dr Lowe said, we have not really seen anything yet in terms of the impact of this painful as it has been already. The first is around reducing demand. We should not treat energy efficiency as a silver bullet. We cannot insulate every home in the country by this winter, but we can start really biting chunks out of that relatively quickly if the funding and the support is there to enable people to do that. Secondly, personally, I would like to see Governments doing much more to talk to people about the behavioural things that they can do. Turning your thermostat down by one degree can cut energy consumption or heat consumption by 10 per cent. Changing boiler flow temperatures sounds very technical, but it is not very hard to do. It can save somewhere between 5 and 10 per cent. People can do things directly themselves, which support all of that. Secondly, in terms of the medium term, I am afraid that I will not say anything terribly surprising to you. We need investment in renewables, but it is not just about the money and the investment frameworks. It is also about removing the planning constraints, for example, that mean that offshore wind and onshore wind projects take a lot longer to get from project conception to delivery than they need to, although Scotland is certainly in a better position on onshore wind than other parts of the UK. Thirdly, around investment in nuclear and so on, I think that looking at those kinds of things is sensible when we look to what was the net zero power system in the 2030s actually looked like and how do we make sure that in a very, very renewables heavy system we can continue to service demand when we need to. The strategy now needs to be looking at all three of those timeframes. I think that the risk with the UK Government energy security strategy is that it looks much more at the third and the long term than it does at the short and medium. I totally agree with Tim on that point regarding the long term nature of the energy security strategy that came out from UK Government a couple of weeks ago. It just seems to be looking at the long term rather than the short term. I guess when you think about what a policy response should be, you need to think about what the problems you are trying to solve already. I guess that there is obviously the climate change issue that needs to be resolved, but energy security comes to the fore in a way that I do not think anyone expected it to actually. There would always be a sort of a relaxed assumption that we could rely on fossil gas imports as we gently weaned ourselves off them in the move to net zero. You need to tackle both of those things. I repeat what I said before. The first point is that these prices have not hit people yet. The most important thing is that people have got enough money to be able to eat and keep their houses warm. If anyone is struggling, then they need to be offered some sort of support from benefits or from the system. The next winter will be extremely tough, particularly if it is cold. That should be at the forefront of everyone's mind, because that is going to be the key issue that is a direct health impact, a direct social and welfare impact. When we think about longer-term energy strategies, there are some interesting parallels to draw between what happened in the 60s and 70s. Similar price spikes around oil led to strategies in Scandinavia and the Nordic countries to wean themselves totally off oil for heating. Those countries led significant decade-old, multi-decade-old energy efficiency and electrification policies, which now means that Sweden has the world's largest heat pump market in Norway's second behind. In Denmark, there are huge heat networks—it is one of the largest heat network markets—and those were rational responses to an oil price issue. The price impacts that we have seen over the past few months are certainly as big as those oil crises in the 60s and 70s. That is one parallel. The other parallel is the expansion of the UK's gas grid in the 60s and 70s. That happened for many different reasons to what was going on in Scandinavia, but that followed the discovery of North Sea oil and gas. There was suddenly a huge amount of gas ready to be tapped into that we knew could heat homes and power power stations eventually. The response to that was to convert the UK's gas grid to run on natural gas rather than to run on town gas and to expand the gas grid. The parallel there is that we are running out of gas from North Sea very rapidly. We know that it will basically all be gone by 2035-2040 and, at the same time, the cost of renewables has plummeted totally. A strategic response could be a national strategy based on energy efficiency and electrification because they are the resources that we know that we have available now and are increasingly cost effective. The other important thing to say is that, in the short term, although we cannot deliver lots of energy efficiency immediately, steps can be made to bolster that market because there are things that you can do, many of them that Tim has mentioned, but I would be a bit bolder on delivery and deployment. You can insulate a lot more lofts if you really go for it over the summer period. There should also be a short term impetus around energy efficiency as well, but as long as that is part of a longer-term pathway. Thank you very much, Dr Lowes. Let me bring in other committee members. I think that the opening remarks have covered a huge number of really interesting issues. Fiona Hyslop, please. Thank you very much and good morning. Thank you for joining us. Please feel free to expand on your previous remarks. I am very interested in that historical context that we have just heard of from Dr Lowes. That rapid change to accelerate electrification, particularly in Scandinavia, in the 60s and 70s. Some of us are old enough to remember 1973 and the oil crisis and the implications that it had very practically. What can we learn and how quickly—to Dr Lowes first—how quickly the response was in the 60s and 70s and what should we be expecting now? Are there any lessons to learn from that? I will come to Dr Lowes first on that. Thank you. That is a great question. I am afraid that there is no simple answer to that. That is because the response to it was a very strategic response that took many decades. If you look at the example of energy efficiency and heating, it is fair to say that, for example, Sweden went on energy efficiency first and then went on electrification more. If you look at the example of heat pump deployment, which really started to kick off only in the late 80s and 90s, what that relied on was continuous support. It had a target. There were measures introduced, including carbon taxes, grant support, skill support. All those things happened together, but they were maintained over the long term. That was to build up the base from nothing and then to end up in a situation where now it is second nature for you to get heat pump, if you get your heating system replaced in Sweden or even in Norway. I am afraid that, in the short term, there is not much that can be done initially to drive those things apart from setting up the framework to eventually deliver them. I know that that does not sound particularly helpful, but that is how you do it. It cannot just all be done in a year. It is going to take decades, but the earlier you start, the easier it is. Can you bring in Dr Hannon on this and any other international comparatives, either historical or contemporary, that you might want to reflect on, Dr Hannon? Yes, absolutely. I echo the fact that it is a very important question and I think history does have some lessons. I minded it from your question about what Japan did post Fukushima in terms of trying to reduce its energy demand. It lost many of its nuclear reactors, some of which are still mothball today. The programme there known as Setsu doesn't excuse the lack of native tongue there, but it achieved roughly a 20 per cent reduction quite quickly on their energy demand. With that, and this was basically trying to cut the fat, if it forms for a better word, around maybe what was running and what wasn't essential, maybe desirable. I don't think that the UK or Scotland has positioned itself on a war footing in terms of tackling this crisis. I don't think that we, as Dr Lowe quite rightly says, we're aware of the scale of the pain that is coming, but until we feel it, I don't think that crisis management will kick in and I'm concerned about that. I think that crisis management doesn't just come from government but it also comes from people around the kitchen table at home about actually feeling the pain of this and positioning themselves. But they need to be helped to do that. One of our greatest tools that we have is energy advocacy. Many of these useful centres of information, some of which are on our high streets, I myself am chair and trustee of an organisation called South Seeds, which is a community environmental charity based in the south side of Glasgow. We quite literally have a shot front there where we bring people in who are struggling to pay their bills and we speak to them and help them to identify not only the scale of the problem that they're facing in terms of their energy bills but what the causes are at home. Some of that will be around energy efficiency going back to the Fukushima example, things that they are running which they can do without, but more often than not they're already cut right to the bone and these energy advocacy services are stretched to breaking points. This was even before the price cap rise on 1 April. At South Seeds we were running, typically we'd be expecting a few days, maybe a week to offer consultation. It was up to three weeks before the price cap rise. My concern is that we have some fantastic people in these organisations offering support, providing step-by-step guides and actively helping people to reduce their demand but also providing them emergency support through things like the energy redress scheme. However, if you cannot get an appointment at these organisations, you cannot receive the help. There are people waiting, literally waiting, for these appointments to get their energy bills paid for. I would just to summarise that. We need to treat this like a crisis. I think we're calling it a crisis but I don't think we're quite treating it like a crisis yet. Part of that is providing face-to-face support to advocate solutions and to help to unpick the very complex issues that people are dealing with, because it's not just energy prices that are feeding into this cost of living crisis, but it's a myriad of interconnected pressures. Households need somebody to put an arm around them and help them. I move to Tim Lord. Do you have any reflections on the international and historical lessons that we might learn? Secondly, if this is a crisis as we've heard and it is, we also know that we're facing the climate crisis. We've referenced the trillions of funds that are needed to be invested. We've heard from Dr Hannan that a Fabric First approach to helping the immediate short term is going to be essential. Is there no way, therefore, that we can ask the private sector and for them to mobilise themselves to helping that investment in the short term in an area that perhaps might not be as attractive of as offshore wind investment, for example, but will make a real difference to people's lives this winter if that mobilisation can take place? It's quite a large canvas there, but any reflections would be helpful. I think that there are five key things I draw out when you look at the international comparisons and also the historic comparisons here in the UK, including more recently through energy efficiency programmes such as the Green Deal, which perhaps, or not perhaps, we certainly weren't as effective as we hoped they would be. It's really important to look at this from the consumer perspective. The first thing I would say is about information, where something like half of people don't realise their gas boilers create greenhouse gas emissions, so they don't necessarily appreciate that context. That isn't their fault, that's because that hasn't been explained to them very well. Secondly, when you try to get information about your own homes, energy performance, things like the EPC certificates and so on, I'm not necessarily providing very high quality of information. I think that's the first thing that we collectively can address, and I think that the Government can play a really big role in addressing this, helping people to understand the context of their energy use, in particular, in their own homes. The second challenge is around capital costs, and the fact that those capital costs are high, and they are higher at the moment in general for low-carbon heating solutions, but that doesn't have to be the case. We've seen other countries tackle that. To directly address your point about the private sector, I think that absolutely the private sector can and should be investing more, and that we're obviously a very large investor across the economy, through our pensions business in particular. What we really need there is not the Government to just pay for all of this stuff, but what we need is better investment frameworks in place. We need seed funding, we need things like interest-free loans that can have huge potential grants, to some degree in particular, for those on lower incomes. What that can enable us to do, hopefully, is to package those up into larger potential investment opportunities that the private sector absolutely should and I think is ready to be quicker in getting behind. The third issue is around the running costs. At the moment, until a few months ago, the running costs of, for example, a heat pump were higher than for a gas boiler. That isn't necessarily the case now. Interestingly, heat pumps are potentially cheaper to run in most contexts than gas boilers because of the rise in the gas price, but at the moment we do load a lot of policy costs, in particular for older renewables projects, including in Scotland, given how renewables have grown in Scotland. We need to look at how those are balanced across bills and across general taxation, because that is providing a direct disincentive for people to move away from fossil gas and on to lower carbon and potentially lower costs forms of heating. The fourth point is about clarity of policy direction. Most boiler purchases are distressed purchases when your boiler breaks and you need a new one. I recently looked into getting a heat pump and I was told that, as soon as I could probably get one, it was 2024. That is not hugely helpful. We need clearer policy direction to enable people to make those decisions around their own homes, which takes me to the fifth and, in some ways, the most important point, which underpins all of this, which is around the supply chain, which will enable people to decarbonise the heating in their homes, which at the moment is simply at far too smaller scale. I think that we can, if we do all the other things that I have talked about, scale quite rapidly over the next few years, so we can start to deliver a million, million and a half homes a year having low carbon heating installations across the UK by 2030. The other area that I wanted to cover was energy market reform. I might come to Dr Hannon first on that. You talked about deep coupling gas, for example, in terms of the price setting. I would be interested if you have used on energy market reform what is needed and when and should we be shifting to ensure that the energy market is designed to ensure secure and affordable and sustainable energy. If you can impact that separation of the gas from that price in market, that would be helpful as well. It is a very live topic, one that I do not profess to have the answer immediately on. I believe that the Government is looking to consult ways on how to do so going forward. The principles are simple in that we cannot do that. If you have a global commodity, how do you start to insulate the effects of gas prices on electricity? I think that one option going forward, which is part of what will likely be a raft of much wider policy and regulatory change, is consuming locally generated electricity in that local area. I think that it is the first or second reading in House of Commons currently, which is around the local electricity supply bill, which is about trying to lay some of the framework and groundwork to enable small electricity supplies that normally are not actually able to enter that marketplace because it is so costly and time consuming and administratively burdensome to meet the licensing arrangements to be able to produce electricity and sell it directly and locally. In doing so, you can start to arrange means by which you are insulating your sales from the wider market, as it were. However, I do not profess to have the answer directly to that, and I think that it is a very live topic, so I will defer to my fellow panel members on that. I would suggest that we might move on to the convener for other members to come in, but I think that if other panel members have anything to say on energy market reform, please indicate, I think, during our chat function or you can bring it in when somebody else is asking a question. I think that Tim Lord might want to say something, and then I will pass back after him to... Okay, thank you, Tim. I am very happy to come in later, but very briefly, you know, the market that we have is designed around gas, so that is low capital cost, high running cost and flexible supply. The market that we need is almost the opposite of that. It is high capital cost, low running cost and flexible demand. Actually, in some ways, one of the most significant announcements that the Government made last week was to institute a programme of market reform. I think that it is absolutely essential that they do that, but within doing that, the key is about fairness for consumers, because often when we think about zero carbon houses of the future, there are four bedroom detached houses with solar panels on the roof and electric vehicles on the driveway, and we need to make sure that whatever reforms we take forward deliver an efficient market outcome, but also deliver an outcome that works for consumers of all types. Okay, Dr Lowes, did you indicate that you want to come in on that? Yes, please, thanks. I say that there are two key elements. One is around the fact that there is still no environmental price reflected into gas, which is basically what Tim just said, but there are issues with changing that, because if you push the gas price up even further, that will cause issues for people, so if any reform is done there and needs to be in the context of wider changes, the biggest issue that I can see at the moment in relation to gas is that the power price is effectively set by the gas price for much of the time, and so even though we've got lots of renewable electricity coming online, we're not feeling all of the financial benefits of that, and so there is discussion of a move to potentially move towards a market where you have separate markets for renewables that can run all the time, which are the low operational cost but high investment cost, and you separate that out to have a bifurcated gas market, so effectively two markets alongside each other. A lot hinges on what will develop with the retail market review, and the UK Government is yet to respond to that consultation, but we'll see that in a few months. Thank you, and clearly a lot of this is reserved to the UK Government, but it's very helpful in our rounded analysis. I'll pass back to the convener now. Thanks very much, Fiona. Let me bring in Mark Roskell. Mark, over to you please. Yeah, thanks. You mentioned previously around the issue of planning, particularly with onshore winds and solar. Planning's obviously devolved. I think there was some reference to planning within the UK energy strategy in relation to English planning system, but what more do you think the Scottish Government could be doing to develop onshore wind and solar with not just planning, but other aspects as well, devolved responsibilities? Could I start with Dr Hannan, please? Yeah, thank you. Will we compare what Scotland's achieved in terms of onshore wind versus England, for instance, since, I think, the moratorium on onshore wind was effectively put in place during the Cameron Government, I believe, 2015. Very little onshore wind has come online in England, whereas in Scotland we've rolled out a significant amount. Obviously, White Lees wind farm just south of Glasgow is testament to that, and one of the largest onshore wind farms in Europe. I think the first thing to say is that those devolved powers around planning, alongside some of the subsidies that were in place during the mid 2010s, enabled onshore to come online. The onshore renewable roll-out, I would say, in Scotland has maybe suffered somewhat at the hands of how the contracts for difference were structured in recent years. Slowly but surely we've seen onshore wind start inch back in with things like remote island wind. Now it's explicitly noted that onshore wind is now made provision for, albeit in the forthcoming round of the CFD, that we'll see a relatively small budget for that, and a cap, I think, a UK-wide of about three and a half gigawatts. What more can we do? I think that the crucial point I want to get across is to couple the idea that onshore wind is for communities, and I think that we can also extend the tip to offshore wind, but if communities can see an onshore wind site and they understand that a portion of that is owned by them and that a portion of the revenue surplus that is generated from that is going to be controlled by them and spent by the community, for the community, I think you will see not just less opposition to onshore wind but also a greater appetite for communities to partner with other local stakeholders to initiate new onshore wind initiatives. I would include small-scale solar, not necessarily small-scale, but I would include solar and also hydro in this, framing the onshore renewables as for the community, managed by the community and owned by the community. It may not be wholly but certainly in part, and I think obviously Scotland has done fantastic things on this front, but many of the communities that I face and we've done a lot of work around finance in the past, one of the big issues that they have is in low-income communities. They don't have the local citizen finance to crowdsource in. What that means is that the community itself doesn't necessarily have the money within it to kickstart those initiatives. With the absence of many of the revenue payments that we've seen, such as the feed-in tariffs, the renewable heat incentive, which we've all gone offline recently, finance is harder to secure because these communities can't offer the same return on investment to investors, so they're having to rely much more on their own pockets, and that's difficult in low-income communities. I would say that the focus, if we want to go big on onshore wind, and we're very serious about that and other onshore renewables, is that we need to support these lower-income and high-fuel poverty communities to initiate their own projects. Just briefly, that is a follow-up to yourself. Do you think that community benefit should be a material consideration in the planning system then, because at the moment it isn't? Projects have to be considered on their merits. What they look like, where they're cited, that wider community benefit isn't something that is part of the determination of a project, and it's the planning system that's holding everything up at the moment. There was an interesting piece of work by Aquaterra that was released a few months ago, which compared a number of projects that were privately owned and had community benefit funds versus those that were community-owned and had community-owned managed benefit funds. They identified that, across those projects, if they compared the two groups, that there was 34 times more community benefit in terms of value drawn down by community-owned. That strikes me if you are a local authority looking to support various climate but also social welfare objectives. That seems very important to me. I would encourage Government to support local authorities to prioritise planning where those projects are able to not only generate significant surplus through low-carbon activities but to ensure that that surplus is managed by the community for other initiatives that may be delivered on that triple bottom line value—economic value, environmental value and social value—in the planning regime, in my view, should support that. Okay, thanks. Can I get reflections from Tim Frost on the question of onshore wind and solar? In terms of the wider context of your question on planning as well, I don't claim to be an expert in every detail of the Scottish planning system. I would also say that, in Scotland, we've got a lot right in terms of renewables deployment over the last decade and we should build on that success. I guess the key points I'd make are, first of all, about pace. It was said earlier that we're not yet treating this crisis like a crisis, and it is a climate crisis and energy supply crisis. We're looking throughout that chain. This isn't about running roughshod over what local communities want, but we know that about 80 per cent of people support onshore wind, about 4 per cent oppose, and the US politicians know better than me that it's quite hard to get 80 per cent of people to agree about anything. We have that bedrock of public support, so I think that there is a case for looking very closely at how we can take any fat out of that system to ensure that projects that might take only a couple of months to actually build don't take 10 years to get to the point that they're being built. I agree with the points that Dr Hannan mentioned around local benefits to communities, which I think has been very effective in other countries as well. I think that we've made some progress on that here, but I think that we can do more. The third point I'll make is about investment in networks in particular, and I think that that is something that we underestimate the challenge of at the moment. There was some reference in the UK energy security strategy to investment in the plants of need, but when we look at the scale of renewables potential in Scotland that is still unexplored even with the progress that we've made so far, getting that energy to where it's needed and getting it to work productively and avoiding huge amounts of it being constrained off a lot of the time, which is deeply inefficient and quite rightly deeply unpopular and politically challenging. That is a huge challenge and I think thinking strategically about how we are delivering that network investment, not just for the onshore network but also for the North Sea as a strategic electricity generation asset as well is really important and I think obviously that is partly reserved and elements are potentially devolved as well. So a complex challenge there I think for the Westminster Government and the Scottish Government to address together. And then the last point that I will make is thinking about this as a systemic challenge. What we've sort of done on electricity is we've made huge progress in terms of decarbonisation but we've kind of done it in swim lanes. We're thinking about electricity and we're thinking about homes and we're thinking about transport and we're thinking about hydrogen whereas actually the nature of the transition we have over the coming decades is all of those things merging together and interacting with one or another. And the more we can think about that investment challenge and the planning challenge in a systemic way, for example, how can we use excess renewable power to generate green hydrogen, for example, will be really important in terms of how we achieve this in a way that's efficient but also in a way that can drive economic benefit beyond just low energy prices and into things like creation of new industrial sectors in Scotland and elsewhere in the UK. Okay, thanks. Dr Loes? Sure. So Tim talks about networks and Matthews talks about wind and I think they're both two huge infrastructure planning challenges. The other is buildings and there are huge amounts of planning regulations at a building level that need to be effectively ripped up in many ways if we're going to reach what the targets say we need to reach and what most people want us to reach. So the Scottish Government has made good headway in terms of the LHIS work, which is around local homes and energy efficiency planning. So that's good and that can be continued because that is needed. It's local area-based planning that looks at energy efficiency and heat networks potential, but in terms of actual planning permission, there are huge amounts that still hold back the deployment of renewables and energy efficiency at a buildings level. The one that really gets me going is windows, the fact that in some cases you have to apply to get secondary glazing or even double glazing. This is linked, of course, to heritage and to conservation areas, but at some point a judgment's got to be made. What's more important? Do we manage the heritage or do we meet our net zero targets? The example that I give you is that there's a B&B I've stayed in a couple of times in hillside Crescent, not far away from the Parliament building at all. It has three metre high windows, probably solid stone walls, all single glazed and it's a conservation area. Those buildings need to be decarbonised and there's really nothing that the owner of that hotel can do. A decision's got to be made that says that you're allowed to put double glazing in these buildings and you're allowed to insulate them because if you can't insulate them at all, then you're going to really, really struggle to meet not just your net zero targets but to ever make that building affordable to heat. You need to remember that in the context of the fact that their energy costs will have basically tripled by next year. Building level planning not just for glazing but also for energy efficiency needs to be totally ripped up and started again. Okay, thanks for that. Can we move on to something a bit different and that's blue hydrogen? We've seen governments, UK, Scottish Government, certainly bigging up the potential role of blue hydrogen but that was before the gas price started to peak before we've seen the volatility. Where do you see blue hydrogen sitting now? Are the economics of it still sound given this gas price? You also note that a lot of the CCS projects that are being proposed around the UK have got blue hydrogen as part of that business case. Do you see a role for blue hydrogen in terms of heating or where should we be using it or should we be using green? A few thoughts on that would be good to get back from you on blue hydrogen. Tim Lord, can we start with yourself? Sure, so I think in the relatively short term there is potentially a role for blue hydrogen. Green is currently more expensive and there are some industrial assets which are potentially quite well suited to the production of blue hydrogen. I do think we need to think very carefully and cautiously about it for a couple of reasons. One is, I talked earlier about one of the big challenges around international commodity markets, particularly gas, is not just the level of pricing, i.e. whether the price is high but the volatility of price as we move through what is potentially a fairly sustained energy crisis and through a net zero transition, which will have significant volatility attached to it. Now, if we put too many eggs in the basket of blue hydrogen, we are essentially building that volatility in to a really important market. While certainly there are potentially projects that could be useful and could be economically viable and which investors will want to get behind, we need to be very careful in terms of thinking about what we need to believe for this to be economically viable in the medium for long term and what sort of pricing situations would potentially undermine that. That is the first reason. The second is that in terms of emissions, blue hydrogen does still produce emissions. Ultimately, if we are going to get to a net zero, those will need to be offset, captured somewhere else, which obviously impacts on the economy. So, again, when we are thinking long term, we need to be thinking about the whole system cost, if you like, of blue hydrogen as opposed to alternatives. In terms of the use case for it, I fear that you will probably get broad agreement from the panel that hydrogen has a hugely important role to play. If you look at the CCC scenarios, they had something like 300 terawatt hours of hydrogen in 2050. That is about as much as electricity that we use today. That is a huge new sector coming from a standing start in what is it now, 27.5 years to 2050. Principally, that is about in particular heavy industry to some degree heavy transport and not really about home heating. I cannot remember who it is that describes hydrogen as the Heineken fuel in that it should reach the parts of the economy that electrification cannot. I think that you would struggle to find independent analysts who would argue that hydrogen in home heating in particular will ultimately be a lower cost solution than alternatives like electrification and heat networks. To summarise, blue hydrogen potentially, but its role needs to be very carefully considered. We need to make sure that we are getting to the parts of the economy where it can be most effective in comparison to the alternatives and, in most cases, that probably is not home heating. Dr Hanliff, do you have anything to add to that? Not a tremendous amount, I think, as Tim says. I think that there are just a couple of points to raise. It is about market formation and signalling where we are going to take this hydrogen market. I think that the first and foremost, as Tim rightly points out, what are we needing it for? Where will it be required? I feel like that debate is starting to settle in, and I am sure that Rich will come in in a moment around its role with regards to heat. However, it is important to signal where it will be required, but the secondary question to that is whether it is green or blue. The more that you push on blue, the less that you are necessarily going to be able to signal that there will be a future in green. Therefore, you are not necessarily sinking the same investment and effort into growing that supply chain. Therefore, I think that there is a careful balance that needs to be struck. Obviously, there is a lot of vested interests within the blue hydrogen camp that we need to be wary of, too. I think that the final point to raise is around green hydrogen. The more green hydrogen you bring in, the more that you are going to have to invest in a timely fashion into renewables capacity. With the shift in terms of electrification, whether that be heat or transportation, we are already going to need to significantly increase our capacity. That will be extremely challenging, even despite some of the support that we have seen in the energy security strategy just before 50 gig of offshore wind. The point being that the stronger we go on green hydrogen, the more that we then need to consider other system implications that are around renewables generation capacity being brought in at a timely moment, but also the reinforcement of the networks to site that to bring that power into where it is needed. Thank you. We have spent a lot of time talking about blue hydrogen and I have spent a lot of time thinking about it, despite the fact that there is only one plant operating in the world in Canada that is using tar sands to produce very dirty hydrogen that is a bit cleaner than it may otherwise have been. I think that we need to be aware that the context of this is very underdeveloped still. Technologically, electrolysis producing hydrogen from electricity is a more developed approach. I think that there is a question over the economics here. The analysis that I have seen suggests that by 2030, green hydrogen produced from renewables, just for the sake of producing hydrogen, will be cheaper than blue hydrogen. I should say that that has changed even more, because the gas price has gone up significantly. That analysis was before the gas price increase. What that means is that investment decisions being made today may be undercut in 2030. I think that we will see quite limited investment in blue hydrogen. It may be in very specific places where there is a clear case for carbon capture, because it relies on some sort of storage facility. That could be in industrial sites or linked to fossil fuel extraction areas. In terms of the heating question, I guess that there is an energy security angle that we have not really talked about for blue hydrogen. It is that you need more gas in the first place than you would have used if you are replacing gas with blue hydrogen, because of the losses in the process. If anything, that would be an energy insecurity strategy to go for blue hydrogen for heating, because you would be increasing your exposure to fossil gas. I was fairly staggered in the energy security strategy a couple of weeks ago to see a potential for up to 5 gigawatts of blue hydrogen, because it does nothing for energy security. It weakens energy security, if anything. Where to put it, though? As Tim said, there is a huge role for hydrogen in the UK and in the world, in a net zero world, but you need to be very strategic about where you put it. This idea of just dumping it into the gas grid, which seems to be the suggestion from UK bays, would be incredibly inefficient and very expensive. What you need to do is target it towards the industries where it has most value. The job of the Government here is to find those industries, to find out which of the bits that you use the hydrogen for and how you get it to them. A huge chunk is fertiliser production. That is the biggest use of hydrogen in the world outside of the oil and gas extraction industries. Fertiliser is one to aim for, but there will be other industries that use it too. The other huge one is in seasonal storage. We are going to need something to balance out the energy system over the course of seasons of the year. Hydrogen is seen to be one of those things. With the potential for wind in Scotland and of course already curtailed winds and excess generation, it seems to me that there is a very sensible case for thinking about that particular strategic investment in Scotland. Okay, thanks very much. I certainly do not think that we want an insecurity strategy at the moment. Can I just ask a final question then about fracked gas. Do you see gas from fracking having any bearing in terms of energy supply and the cost of living crisis now in the years to come, short-term, long-term? Any quick thoughts on that? Tim Lord, on start. Sure, very briefly. I think it's worth going back to the original objectives of what a strategy should look to achieve. That is about overall reducing prices and reducing energy and security. The issue with fracking is essentially that it won't have a big impact on prices. The UK at the moment is around a bit less than 1 per cent of total global gas production. We are an extremely well interconnected market, which has had some advantages for us in the past. If we produce more gas, it will go straight into that market. It seems to me that the analysis indicates that it is unlikely that that will have a significant impact on prices. Unless you do things like introduce price controls or export controls to keep it here in the UK, in which case you would struggle to get any investors to get behind that because of the uncertainty that that creates. I think that there is a lot of heat in the fracking debate. To me, it is about will it help to achieve those objectives in the short, medium or long term? In that context, it feels a little bit like a red herring. In particular, when you layer on top of that, the challenge is of delivering fracking at scale given the need to bring communities on-site. We know from plenty of polling evidence that fracking is less popular than a number of alternative technologies. In some ways, there is too much heat in the debate, but the question is whether it really contributes to the kinds of public policy outcomes that we are trying to achieve through an energy security strategy. To me, it is certainly not clear that it would. Any brief comments on this from Dr Lowes? I just echo Tim's points. From a Scottish context, I previously worked for Scotland Gas Networks. When we looked at this then, there were only relatively small amounts of potential for fracking in Scotland and towards the more southern areas of Scotland. From a Scottish impact, I think that it would be quite limited. The reality is that you could produce some gas from fracking if you wanted to. There are significant environmental consequences of doing that, that the industry does not talk about in terms of water use and waste and leakage of methane, which is another huge global issue. The impact would be slight. There would be a possible impact in terms of quantities of gas produced, but the impact on price would be negligible, as I think that the former boss of Codrilla himself said. Dr Hannon, any final points for our hand back to the convener? No, nothing more to add on that. Great, thank you very much Mark. Let me bring in Jackie Dunbar to be followed by Liam Kerr. Jackie, over to you please. Thank you convener and I realise that we are running out of time again, so I will keep my questions brief. I think that we were hearing earlier from Dr Lowe's regarding what support should be offered for folk going forward as the price increase hits people. First of all, how significant do you think the impact will be on the increase in the cost of energy and the fuel poverty? With the support that the UK and Scottish Governments have already announced, how can that help? Is there anything else that could be done? There are lots that could be done, and this is a matter of political will here. What has been offered already, I think that the council tax rebates, is England only, I think. I am not sure about that, I would have to check. A council tax rebate and a loan on energy bills. The loan on energy bills only really helps people in the short term, so I think that that measure can effectively be discounted. I think that it is a slight gimmick. In terms of what people need, I am afraid that it is simply cash, and that needs to be found however it can, because these are going to be very difficult times. If you think that an average house's gas bill might be going up by two and a half times by next winter, that is potentially an extra £1,000 about going a year. At the same time, the price of food is going up as well, in part because of the energy price rise, but in part because of other things. Really in the short term, it has to be just cash support to people and being able to identify those people. I know that sounds particularly grim for the first morning back after work, after holiday, but that is the sad reality. In the longer term, the Scottish Government has got it quite right with regard to energy in terms of the package of measures that are available at the moment. The fact that you can get a grant and a loan at the same time to up your house is something that should be applauded. The long-term package is there, but it needs to be utilised more. In the short term, the availability of cash needs to be there for those that most need it. Do you have anything to add in relation to that? I was also going to ask you, because you mentioned about the further price cap happening in the autumn. Can I ask you what the impact of that will be on top of the question that I have already asked, and if there are any other future measures that you think could or should be put in place? Yes, absolutely. There is a Cornwall inside forecasting that, potentially by October 1, we will be looking at your average fuel-fuel bills at £2,600. That is an additional £600 plus on top of where we are currently at. I think that the number one way of supporting the least-wealthy families is that the higher the cost of living and the cost of energy in everything else, the less disposable income that we have to be able to invest in our homes to reduce our energy costs. We find ourselves in quite a predicament. The state needs to step in and it will most likely need to step in and support homes that, otherwise, pre-energy crisis were in a position to be able to invest in a retrofit, whether it is simply loft insulation or a more comprehensive retrofit to reduce energy costs. There are homes that are not fuel-po and that national energy action predict that, potentially by October 1, if energy bills reach £3,000, which is not impossible, we could see £8.5 million homes in the UK fuel-po, which is more than double where we currently are. What we need is the energy supply obligation to be increased in terms of funding and for that funding to come online as soon as possible. This is problematic because Bays have just announced, April 1, that they were only going to increase the funding from £640 million to £1 billion. That would see, effectively, over the course of those four years, 450,000 homes in the UK supported with efficiency measures. That is about 112,000 per annum. If we look at what we were doing 10 years ago, that is about a tenth of the scale of investment that we were making, or a tenth of the measures. We need to expand the eco. It needs to be an order of magnitude larger in size. Tim pointed that out earlier. That money needs to come online now. It should have come online when the October price rise hit last year, and we knew that that was already starting to happen. However, if we were serious about that, we could, UK-wide, insulate hundreds of thousands of homes before the October price cap rise, because we were already doing that 10 years ago. The final point to make is that, although there are elements of eco that are to be commended, for instance, there is a much greater focus on fuel-po and multiple measures, essentially deeper retrofit. We cannot forget the people in the middle who are somewhere between they are not fuel-po, but they are also feeling the pinch to the extent where they are wanting to make these efficiency measures. What do we have there to support these families who are just about managing? There is a significant amount of effort to be made. I do not know to what extent Scottish Government has the reserve powers to make a difference here, as I understand that this is a UK policy, but that could potentially be applied. As I said, I am trying to keep it very brief. So, if I can ask Tim Lord if he has got anything to add to anything that I have already asked, then I will pass it back to you, convener. No, nothing to add given time. Thank you. Thank you very much, Jackie. I think that Monica Lennon has a supplemental in this area. Thank you, convener, and good morning to the panel. It has been a really interesting session, so I was quite happy to mostly listen today. I was struck earlier on by one of the comments about the behaviour changes that people can make, and I accept that there are things that we can all do, but it strikes me that we do not have a behaviour crisis here. It is a market crisis and a system crisis. One view is that increasing democratic ownership of Scotland's energy resources could help to support local energy cooperatives and smaller energy companies. I wonder if our panel has a view about the potential role that a Scottish public loan energy company could play in protecting consumers and the climate and providing clean, green and affordable energy. I know that people want to hear immediate solutions so that we do not have bills of £3,000 a year, but thinking about what a future energy system could look like in the medium to longer term, what could the Scottish Government be doing, maybe come to Dr Hannon first of all. I know that it has been discussed over the years and something that I would say versus community energy is something that we haven't seen, that kind of public ownership, whether it's at a local, regional or devolved level, come to the fore. I personally think that there's a lot to be said for a not-for-profit model, whether that is community or public owned or some blend of the two, and where those profits are reinvested into the catchment area of that supplier. It's not just the fact that they're reinvested in that area, but they're reinvested in a way that supports the strategic aims of the individuals or organisations that own that company. In this case, it would be a combination of the Government and the people of Scotland, which seems to me a very sensible strategy when you are dealing with two conjoint crises of energy and climate. I also think that there would be an opportunity for such an organisation to operate alongside other strategic bodies such as the National Infrastructure Bank and Scotland's National Investment Bank to be able to invest in ways that could support that supplier, to deliver cheaper greener tariffs and as well as meet wider policy objectives. I'm conscious of time, so I'll pause there for the other panellists. Thank you. Thank you very much. I don't have to chip in, but if other panells want to provide a brief answer, I'm not getting an indication. Back to you, convener. Thank you, Monica. Let me bring in Liam Kerr or Liam, please. Thank you, convener. Good morning, panel. Dr Lowes, I'll direct my first question to you, if I may. I was quite surprised to hear your comments earlier that North Sea gas might run out by 2035. I presume that this is a reference to the NSTA discussion of investment rather than actual reserves. I wonder if, in your answer, you might just clarify before we set any hairs running. On that point, gas generates currently about 36 per cent of UK energy, and imported gas, as I understand it, is the last unit bought to satisfy demand, and that contributes to the overall price. We also know that imported LNG from Qatar, for example, has two to three times the carbon footprint of that, which is locally generated. Dr Lowes, does it stand to reason that one way to reduce energy prices and push us on the journey to net zero, whilst demand exists, is to ensure more domestic gas? My reference is to national grid figures in their future energy strategies, which are publicly available. They show a rapid decline, which we have seen already continued, basically as a straight line, out to 2035-2040. I am not saying that it will be totally gone, but it will be expected to be in those forecasts, at least at very low levels. I do have a concern with the idea of increasing investment in the short term, and it is a risk around long-term impacts. If we go even more quickly for North Sea oil and gas extraction, I worry that we end up in a situation where we are even more exposed even more quickly. That is my fundamental concern about going even quicker. I think that a more sensible approach might be a slower and more strategic extraction to balance out the risk of imports and own supply in the shorter term. I am not sure that I quite agree that the last unit that we buy is always the imported one. If we look at the imports and exports, the balance of gas over the past six months or even year, we have still been exporting plenty of gas. It really is a global market, and the price of unit of gas reflects the global market, not the price of North Sea gas. I guess that a really simple way of seeing that is looking at the profits of some of the UK-based oil and gas extraction firms over the past year, because they have been effectively receiving income that they were not expecting to receive. We need to think very carefully about gas imports. LNG, much of which has historically come from Qatar, is high carbon, significantly higher carbon than UK-produced gas, significantly higher carbon than gas that we import from Norway. Over the past couple of years, which has happened very quietly, we have seen the importation of shale gas from the US as well as LNG. That gas potentially has an even higher carbon footprint than that of LNG that we are importing from Qatar. I think that there are balances and trade-offs that we need to make against all of the sources of gas, and this is a geopolitical issue, like no other really. But I urge caution against the idea of going as quickly as you can for North Sea oil and gas in case we make it run out even quicker. Very grateful. Just for the avoidance of the doubt, those were spice figures from the energy price crisis in Paxon, Remersies and Scotland that I was quoting. Tim Lord, I will direct my second question to you. If I may, according to Spice again, one of the key drivers of the recent increase in the wholesale price of gas was a relatively windless summer in 2021, which made it difficult to generate wind energy. You said earlier, Tim Lord, that we needed another reliable way to satisfy demand. In fact, the reference that Dr Lowe has made earlier to the national grid, the future energy scenario, specifically suggests that nuclear might be a significant part of that in our journey to net zero. Tim Lord, what is your view? Is that reliable source nuclear generation? What impact do you think that new nuclear could have on the price to consumer if it can provide that reliable base load? I guess on your first point in terms of the wholesale price of gas last summer, I don't think that renewable performance impacted on the wholesale price of gas. I think that it adds a pretty marginal impact on the price in electricity markets, at certain points, and some of the steepness of the peaks in quite short windows, but clearly the key driver over the next 12 to 18 months will be the wholesale price of gas. In terms of your question on nuclear, it is very clear that the cheapest and also the most net zero compatible UK electricity system will be fairly renewables heavy over the next 30 years. Clearly, that needs to operate in tandem with other technologies. People who work in the energy sector will know that the wind does not work when the wind is blowing, when the wind is not blowing and solar places similar intermissancy challenges, but I think that they can be managed. What that means is that you need a suite of technologies to support that. You are going to move from a position where gas is the backbone of the energy system. I think that it is earlier as provided between 35% and 43% of energy for the last 20 or 30 years, and that is going to change. In electricity, offshore wind will increasingly be the backbone of the system, so the question is what works around that. I think that you can have a combination of technologies there. I think that storage has really significant potential and is reducing in price, but clearly challenges around long-term storage. I think that green hydrogen can play a potential role in the electricity generation sector as well. I think that nuclear absolutely has a role to play because it brings different things to the system than renewables bring. Clearly, the unit price will be somewhat higher than renewables, but it obviously provides reliability and other advantages that can complement renewables and other technologies, I think, quite well. For me, the key thing about nuclear is not how many gigawatts do we think we are going to have in 2050, but what are we going to do in the next five to ten years to deliver investment, reflecting the fact that we have not built a new nuclear power station in the country since 1905? How do you get investment in the next five to ten years to get that supply chain moving and hopefully to deliver the kinds of cost reductions that, for example, South Korea have seen by taking a fleet approach to deploying new nuclear power? Thank you for that. I'll stick with you for my final question, Tim Lord, if I may. Thank you for that interesting answer. You talked about the next five years on nuclear. You may not be able to answer this question, but I do appreciate it. If any of the other panellists can, I'd be very grateful. Tim Lord, in January, I asked the Scottish Government what impact closing Hunterston B and Torness would have on consumer energy bills. The Scottish Government was unable to tell me, because apparently they haven't modelled that. I then went on to ask what is the price of electricity generated by Hunterston B and Torness in an attempt to reverse engineer the answer. Again, the Scottish Government doesn't know the answer to that, which I have to say I find rather surprising. Do you have or could any of the panellists source that data? In any event, are you able to theorise what impact shutting these two generation stations in Scotland might have on consumer energy bills? I'm afraid that I don't have that data, and I haven't looked into that question specifically. In terms of the broader point, the existing nuclear fee is ageing, and many of them will close down. As you said, some have closed recently, some of the rest will close over the next 10 years or so, but in terms of the impact that will have on consumer prices, I'm afraid that I haven't looked at that in any detail for those plants in particular. I don't know of any of the other panellists have. Thank you. I wonder if either of the other panellists—I appreciate it—it's a slightly niche question to drop on you just in committee there. If either of you have anything to say on that, and if not, Dr Hannon, you might want to come in. Thank you. It's not a direct answer to your question because I don't have the data like Tim, but I would say that if we're removing that from Scotland's energy supply, then we are by default having to rely on other forms of baseline, and currently I'll go to that without nuclear. We are looking at other fossil fuels gas most notably, but we have also seen cold occasionally peak back onto the grid to support. Also in Scotland we would be relying more on nuclear in the outside of Scotland but within the UK. I think that some of the developments we're seeing in the energy security strategy and the significant support for new nuclear, Scotland will have to keep one eye on developments there and the likely costs that will incur. We've seen year-on-year delays and cost increases to Hinkley Point C. The final point to raise is that Scotland needs some kind of baseline. Tim pointed out some important technologies there, but we have one that we are developing ourselves, just off the coast of Auckland, north of Scotland in terms of tidal stream. I think there are opportunities there and other forms of tidal range that can be located elsewhere in the UK. Innovative forms of storage, such as the Scottish-based company Gravitricity, using X mine shafts for that. The indirect cost of knocking nuclear off the system is having to support research and development to fund new technologies to fill that baseline gap. Very grateful to you all, thank you, convener. Let me bring in Natalie Dawn, who is joining us remotely. Natalie, over to you please. Thanks very much, convener, and good morning panel. We touched on a lot this morning. I just want to refer to the price cap that we've seen. Obviously, Dr Lowes, you've pointed out already this morning. People haven't really felt the impact of this yet and they're really going to struggle, especially with prices set to rise again and the colder weather coming in later in the year. Does the panel feel that off-gems price cap is fit for purpose and that off-gems proposals to boost resilience in the energy sector, for example, through financial stress testing for suppliers and increasing the number of times a year that the price cap can actually be adjusted will make a material impact on the market? Sorry, apologies. I'm putting that to Tim Lord first, thank you. In terms of the price cap, I think that we need to be careful about blaming too much on the price cap, as some have, in the sense that when prices do something like this, consumers are going to feel pain and politicians and Governments are going to need to think pretty hard about how to respond to that. To some degree, it's a richest point earlier, the price cap is sort of protecting consumers in the short term from some of the, in particular, the volatility and of course the price rises as well. I think that off-gems is right to look at the issues that it is looking at in terms of, you know, is that six months window the right window or are there circumstances where it should change more quickly? Secondly, clearly there were issues around the financing and the forward contracting models of some of the, and frankly, the financial stability of some of the suppliers who were able to operate in the market when times were good, as it were, but then obviously have gone out of business when times are bad. I think inevitably when you have these kind of price rises, businesses in that sector are going to struggle, but I think there is a real question about whether we have enough resilience built into the system, so I think off-gem is right to be looking at that. So I think it is possible for the price cap model to continue to work. I'm sort of in the camp where I don't like it very much in principle, but I think it perhaps works better than the alternatives in practice, as is often the case with things in energy, but I do think that the implication of your question is right, that there are things that off-gem can and should be doing, both to make the price cap perhaps work a little better for consumers, but also to make sure that there's the resilience and that the barriers to entry in the supply market are appropriate to protect consumers. Thanks, Tim. Yeah, could I ask Dr Hanan to, I'm not sure if you have anything to expand on, and if I could just add, would you agree that the price cap should not be able to be lifted by, sorry, I know there's obviously some discussion over timescales, but would you agree that it shouldn't be able to be lifted by more than a set percentage point within a financial year, which would provide some form of certainty for consumers, because obviously it's just been such a huge jump? So if I could ask Dr Hanan to come in that, thanks. Yeah, I think that's a, it's an important question with regards to certainty for consumers, but the more certainty that consumers have with regards to price, I think the less certainty some suppliers have with regards to their, you know, their financial operations and whether they're able to cover costs. So I would hesitate to take such a step as that, as you outline, without understanding what the implications would be for suppliers, and we've already seen so many go bust, and the cost of that is, you know, has been eye-watering, and consumers are carrying the can for that. So the Office for Budgetary Responsibility have suggested that Bulb, at the time one of the UK's largest suppliers, go and bust is going to cost us £2.2 billion over the next couple of years. So that's being carried forward on to our bills today. So we cannot make adjustments to the price cap in a way that will see more suppliers go bust, because that will, by default, hurt consumers down the line, because they are paying for that. The other very quick point I'd raise as well, I think there's a joint issue with the price cap that on the positive, sorry, on the negative side it delays the pain, it kind of delays the inevitable. We're simply delaying the rising cost, we're just not feeling it straight away, but the positive is that it buys us time, and that time I feel that we may be not used in the most effective way. I'll defer to my point about investing in energy demand reduction now, rather than waiting until autumn, which seems to be the Chancellor of the Exchequer's plan with regard to the autumn statement, to see if energy prices are still high. But the price cap going forward will reflect the prices today. I would encourage us to use the time that we have now, and of course this is why the committee is running the inquiry today, but the price cap gives us that time, and we must use it wisely. Thanks very much, Dr Hanne. I'll extend this to Dr Lowes and just add a final supplementary on if you could expand on what I've already asked. If you feel that the price cap should be extended to regulate non-domestic customers—for example, those who are not on default tariffs and those who are not currently on the gas grid and are, for example, heating homes by fuel oil or petroleum. The first thing that I'd say is that it's worth thinking why the price cap was first introduced, and it was to protect people from excess charges, particularly those so-called sticky customers that have never switched. I think that the price cap that's been, despite the fact, is a significant intervention in what should be a private competitive market, of course. I think that it's had significant value in protecting the most exposed and the most vulnerable to bad practices. I'm slightly cautious around the idea of limiting the cap rises, because that's always an intervention too far. You're fundamentally asking a question about is the market no longer fit for purpose? I'm not sure that's the case. If you were to limit the price cap rises, you would effectively be forcing companies bankrupt. I think that wouldn't be a sensible thing to do. However, I do think that if you think how many companies have gone bankrupt and what that costs to the average person, which is £34 for this year, clearly some sort of tough regulation on the companies was required, and evidence around hedging is clearly needed. Companies need to show that they've bought enough power so that they're not exposed to excellent risk. In some circumstances, that regulation has failed. I think the question—there are two things. On oil, there are often the forgotten households, so often more rural, no connection to the gas grid. Prices have also doubled, at least for oil. If some people have covered already, you'd expect the same treatment for others. The oil market is a very different market to the gas market. I don't know how it could be regulated. I think that it would be very difficult. However, I think more about regulating the market. It's more about targeted support and finding where people need the most help. Enhanced support could potentially be offered to oil customers depending on the level of risk and exposure. However, the other highlight is those people on prepayment metres, because they will be the most exposed, the most vulnerable. It's almost summer, and people won't have the heating on, and they won't have felt any of those price rises yet on their prepayment metres. Later in the year, when the heating comes on in October, November, December, that's when the impacts will really be felt. Those people on prepayment metres, because other people are on direct debits and those costs are spread across the year, that's when they'll really feel it. I'd suggest some real consideration of enhanced support for people on prepayment metres, because they are the most exposed and they are generally the least able to take on that risk, and that's additional financial pressure. I'll pass back to the convener now, thank you. Thank you very much, Natalie. We're running slightly behind, but I appreciate if I could ask one final question of Tim Lord. Tim, one of the requirements that you mentioned to mobilise private capital to finance retrofitting and decarbonisation in the short term was the development of what you refer to as better investment frameworks. Given the need, the critical need to mobilise that wall of private capital into this sector, I wonder if you could elaborate on the specifics of what you would like to see in terms of better investment vehicles. Sure, so I think if you look across the economy at your investment requirement for net zero, as I mentioned earlier, you know there's different estimates but they're all very large numbers. The AVI-1 is £2.7 trillion to 2035 UK-wide and that's broadly comparable to the CCC and other analysis. In one sector, in renewables, we have a really good investment in terms of the contract for difference theme, the kind of virtuous circle emerging there. Obviously, the Scottish Government has done, for example, we have the Scotland leasing round, so we have a really good project pipeline, we have an investable instrument, we have a low cost of capital that translates into low cost of a consumer, so there we've created a virtuous circle and essentially what we need to do is replicate that in other sectors, whether it's DCS or hydrogen or electricity networks etc. I think in homes that I don't think there's a kind of silver bullet to how you deliver that investment framework. Obviously in some ways it's easier in the power sector where you're dealing with large infrastructure projects built by people whose job it is to build large infrastructure projects in a way that a homeowner doesn't see their role in life as you know designing what their heating system should be. There are different challenges, but first of all we need more clarity of direction around where we are going on heat policy so that we know which combination of technologies we're using in which parts of the country, for example, with a bit more specificity than we do at the moment. Secondly, we need to create the conditions for that through, as I talked about earlier, better consumer information and so on. Thirdly, we need to think really carefully about how and where we use government funding to pump prime private investors to be able to come in at scale in two ways. One is around how do we reduce that cost of capital for consumers and one of the reasons the Green Deal failed a decade or so ago was because the cost of loans was, you know, consumer cost 8 to 10 per cent for example. Government doesn't have to pay for everyone and certainly shouldn't be paying for the more well off necessarily than the full cost of them improving energy efficiency or decarbonising heating, but it can help to reduce that cost of capital and then enable private capital to flowing behind that. I think with that kind of combination of measures and the other one is about how we look at this in a regional and localised way, so I think the committee has looked at this question before around different local authorities, for example, and how you can potentially package some of those retrofit programmes in ways that enables large scale, which again can bring big institutional investors in. I think what you see is genuine willingness in the financial services sector now to provide that capital, genuine recognition that this is the key growth area of the economy and a genuine appreciation that for our customers this is the right way to go, but at the moment I think the investment vehicles are not quite there and I think that can be solved, you know, it doesn't have to be solved by government paying for everything, it can be solved by government setting the framework in a slightly different way. Thank you very much, Tim. Thank you, Dr Hanan, and thank you, Dr Lowes. That brings us to the end of our allocated time. It's been an excellent session. You've raised a number of challenges and a number of potential solutions, so we very much appreciate your time this morning and that brings us to the end of the public session and we will now move into private session. Thank you and enjoy the rest of your day.