 Good morning, and welcome to the fifth meeting of the Economy, Jobs and Fair Work Committee. The first item on the agenda is a decision by the committee to take items 3 and 4 in private. Are we all agreed on that? Yes. Thank you. Now, I have apologies from Dean Lockhart and Gordon MacDonald, committee members. I would ask everyone to turn electrical devices to silent or any other device off that might interfere with the work of the committee. We come then to our panel of witnesses for our first panel this morning. Just to indicate, if you wish to come in on a question or discussion, please just indicate by raising your hand, the sound desk will deal with the microphone so you don't need to press any buttons or anything. First of all, I welcome Christine McKenzie, who is the Public Affairs Manager for SSE Scotland. Jenny Hogan, who is the director of policy for Scottish Renewables, Lindsay McQuaid, the policy and innovation director from Scottish Power Renewables, and Stuart Hazeldine, who is professor of carbon capture and storage at the University of Edinburgh. First of all, thank you very much to all of our guests for coming in this morning. I would like to start with just a general question before we come to specific questions from the different committee members. Of course, you will be aware that we are looking at the Government's climate change plan and energy strategy. I just wonder if each of you would like to perhaps comment, criticise or question which key points there are for you looking at and perhaps start with Christine McKenzie. One thing that I suppose is overarching in general is that we are very positive about both documents and welcome the ambition in both documents, but something that needs to be explored further is a route to market for some of the more ambitious technologies. That would include particularly areas such as CCS, pumped storage and even the future upwards trajectory for onshore wind for reasons that most people are aware of. I think that we are generally very positive about both documents but just more detail on our route to market and I realise their consultation so we will be putting in full responses to both of them. Thank you. Jenny Hogan. I echo what Christine McKenzie said. We very much welcome the high level of ambition in both the draft energy strategy and the draft climate change plan. In particular, the target to deliver 50 per cent of energy demand from renewables by 2030 and also taking a whole system view. Both of those were proposals that Scottish renewables put forward, so that is very welcome. We also recognise that a substantial part of the target is going to be relying on UK Government policy, similar to what Christine alluded to there in terms of route to market in particular, also to some extent EU policy. However, it is important that the Scottish Government has set this high level of ambition and vision for Scotland. Of course, it can use its devolved powers as far as possible while working closely with the UK Government to maximise the use of reserved powers. I also highlight that both documents are quite high level strategies with not a huge amount of detail on delivery. There is a lot in there, although quite a lot of it is a restatement of existing policy. We very much welcome more detail and recognise that much of that detail is still to come through the consultation processes. There is also some more detail on the relative benefits of the policies that have been put forward and furthering impact assessment, which I think would also be welcome. Thank you. Lindsay McQuaid. Like the others have said, we also welcome the publication of the climate change plan and the accompanying energy strategy. I think that we are particularly pleased to see that the times model has been used to affect the publication of the CCP, and that gives us a lot of information on policy direction and desired policy outcome, which is an excellent context in which to set the ambition. The 66 per cent target for reduction in emissions is clearly something that we are passionate in supporting. It aligns with a number of our corporate objectives. We are part of the Berdula group, which globally has targeted 50 per cent reduction in emissions by 2030 and to be a carbon neutral power generator by 2050. The ambition that the Scottish Government has set out has clearly chimed in with our strategic objectives as well as an organisation. We have obviously spent some time looking over the CCP and the energy strategy, and we will be taking further time to consider the questions raised therein. We would note that they are ambitious and helpful that they have that shape that we can work towards and look forward to responding to the consultation. As has already been said, this is a terrific place to be working because it is a really good ambition. It is the right ambition. I think that it is founded on climate science evidence and direction of travel and the right trajectory to arrive at 2050. I see that this is a part of a pathway to 2050 and 2032 is a stepping stone on the way to that and has to be the direction of travel to 2050, which both those documents do very well. Again, we are particularly pleased to see the integration with an all-energy system model because that makes different parts of the energy user and the all-energy spectrum take responsibility for all their own actions and it is impossible for people to blame each other for lack of deliverance and integrated portfolio. Again, a lot of this on a route to actually how you deliver this is uncertain, unclear at the moment. A lot of this may depend on UK policy, particularly with bigger items, but in Scotland we have been really very successful in finding niches and ways through that and we have to do that, but I think it will get a lot more difficult because in some ways we have had great success so far in decarbonising and providing renewable electricity by closing down a lot of the older high-carbon equipment that we have and have had previously. Actually, to move forward and go less and less carbon and more and more sustainable will require a lot more innovation and invention than I think we have been accustomed to in the past. Again, if I am representing part of the university sector on this group of four rather than the commercial delivery sector, then we have to work together with that. Thank you very much. We will come then to a question from Gillian Martin. It is a question for people representing the electricity sector. If you take me through your progress today in cutting the emissions in line with the previous climate change plan and how you have achieved that so far, have you achieved that so far? In Scotland, we have displaced about 13 million tonnes of carbon dioxide through renewable energy and renewable electricity in particular. That has been a huge amount of success so far and there is still a huge amount of development of projects in the pipeline. We have about 8 gigawatts of installed renewable electricity capacity in Scotland at the moment. I think that referring to the strategy, there is a range of between 11 and 17 gigawatts additional capacity planned in the strategy up to 2030. We had proposed for a doubling of renewable electricity capacity, so going from 8 to around about 16 gigawatts. We would really be pushing towards the high end of that range. That capacity is very much in the pipeline so that development can happen as long as there are various policies that can allow it to come back to the point about route to market. It is very much reliant on UK Government to allow all technologies, both established technologies and less established technologies, to be able to compete for long-term contracts for power. The Scottish Government has a lot within its power that it can do to help the industry to reduce costs through planning business rates, for example, and other forms of regulation. The targets that have been set in this climate change plan, are they achievable? Sorry, I will come back in. We proposed that target as well—a 50 per cent target. We believe that it is achievable although it is ambitious. The strategy recognises that. As I mentioned earlier, it relies a lot on UK Government policies and, to some extent, EU policies. We have to be realistic about that and accept that that is not all within the Scottish Government's gift. However, if the Scottish Government uses its powers as far as possible and works closely with the UK Government and seeing what comes through in terms of EU policies and how they are transposed into the UK, it can be achievable. That is the elephant in the room. We are coming out of the EU, so there will be certain powers and it will be a case to which Government they go. Do you think that that is something that you would like to lobby on in terms of which powers from the EU would affect your meeting targets? At this stage, we do not have clear policies across our membership and specifically what policies we would want to come across. The main thing for us is that we are able to compete similar to the way that we can now in terms of trading across European countries and beyond. Currently, we would have access to the integrated energy market and we very much look forward to seeing how those kinds of abilities that we have now can continue. However, there are lots of different potential options of how that might happen under different situations. Things like continued access to skilled staff is something that is important to the industry as well. However, in terms of what model might come forth, that is still all to be discussed. Gil Paterson wants to come in with supplementary and Stuart Hazeldine also wants to come in. I will let Gil ask his question. It is in relation to targets and I wonder if the fact that subsidies have been cut will that impact on the Scottish Government's targets? Is there a likelihood that the private sector will invest to replace that subsidy? I think that Stuart Hazeldine wants to come in and then we will come to Lindsay McQuaid. That is a hard question to answer but what I wanted to comment on was picking up on the change in European membership. I think that the European emissions trading scheme has been an overarching umbrella to guide a pathway to emissions reduction for a lot of what the UK has done in electricity generation and in industry emissions. By leaving Europe, that overarching system will obviously disappear as an obligation. It is a question of whether we are going to have a shadow system in the UK that will dictate a trajectory and enforce an overall carbon price across the economy or are we going to abandon that and take responsibility either sectorally or as different parts of the UK to deliver our trajectory on that. To me that is a really major change because in the European trading system it was very likely that the carbon price will try to be pushed up from its present five euros a tonne of carbon dioxide up towards 20 or even 40 euros a tonne of carbon dioxide. Knowing whether we are going to go along a similar pathway or a parallel pathway will dictate the economics of the delivery of all of this. To answer Jill's questions first, I think that Scottish Power Renewables has made a significant contribution to decarbonisation in Scotland. We have an established portfolio of around 1,400 megawatts operating in Scotland just now and we are currently constructing around £1 billion worth of onshore wind assets. Turning to Gill's point and subsidy, that was done under the previous regime, the renewables obligation, which very successfully has established onshore wind sector in Scotland. Acknowledging that that scheme was due to end in 2017 and there have been changes, however there has been a grace period provision allowed to ease the impact on investor confidence. That has been relatively well managed and we continue to have confidence to invest in our pipeline going forward. Looking ahead to our route to market and encouraging a level playing field between technologies as well, we would like to see onshore wind to continue to have a role. I am pleased to know that, in the documents that have been published, there is clearly a future requirement for onshore wind to continue to contribute and that is very helpful as well. In terms of cost reduction and competition, I think that the implementation of a framework like the CFD, the contract for difference mechanism that has gone through one round, that is very successfully driving down the costs that we see coming in from renewables and reducing the burden on to consumers. Having access to a competition like that and an auction is a helpful way of continuing to give investors confidence that there is a mechanism that they can invest against to bring forward further capacity while protecting the consumer from the change that we need to enable to achieve decarbonisation targets. In essence, you think that the public sector is able to pick the ball up and run that the costs itself are of a nature that itself is financing and not needing to subsidise it. Is that what you are saying? A framework is required to sustain that investment. There is no form of new investment in new generation happening just now because the wholesale price continues to be volatile and it is a very difficult forecast. Nobody has the perfect crystal ball that tells us what the prices are going to be against those long-term assets that we are investing in, particularly so for renewables where they are an upfront capital intensive investment. We cannot hedge against how and when the wind will blow. We cannot hedge against input fuel, if you like. That creates a need for us to have some certainty in the type of revenue that we need to facilitate that investment and ensure that we can efficiently attract capital so that we are not pricing risk unnecessarily into that investment. There is possibly a role around corporate PPEs—I am not sure if that is where we are going—but the GOEC that has been proposed, the Government Energy Company that was proposed within the documents as well, is an interesting concept. I would be pleased to understand more about that and have further discussions with officials on that as well. We will be answering that in the consultation, but it is important to note that the corporate PPE market is effectively a niche market and it would not necessarily sustain the amount of capacity that Jenny mentioned between 11 and 17 gigawatts that we see as being required to achieve our decarbonisation targets. Those mechanisms can operate in parallel, but it requires a consumer at the end to be there willing to pay a premium for green energy to give that stability. There is a need to fund that investment and, over the long term, there is a move back through the CFD mechanism as well, seeing money over and above the wholesale energy price being returned to consumers. It is really just that certainty and risk mitigation tool that we are looking for to sustain the investment just now in the pipeline. I think that Richard Lennon wanted to come in with a small supplementary, Christine McKenzie, to come in with an answer as well as Stuart Hazeldane. Richard will then come to Christine McKenzie and then Stuart. My question particularly is to Lindsay McQuaid and to Christine McKenzie, which is to pick up on the point about the exceptional levels of investment that have been in renewables over the last decade and a half. Perhaps he could tell us a little bit more about the extent to which Scotland's manufacturing base, Scottish jobs have been created, Scottish steelmaking has benefited from that level of investment. If he cannot tell me this morning, even perhaps if he could supply that information to us, I reflect especially on the Beatrice offshore project, where I know that the fabrication work is being conducted in part in Scotland, but two thirds of it is being constructed in Denmark and Holland. To come back on a few of the points, just on the onshore subsidy point, it is disappointing that there is currently not a route to market, but we are still enthusiastic that that might come forward. In a framework to echo what Lindsay said, there is a job to be done there looking for a framework that might potentially open the route to more onshore when we are not given up on it, because, after all, onshore wind continues to be the cheapest low-carbon generation form of energy that it can build, and it can also support local supply chains in a way that other renewable sources perhaps cannot so well. To come back to Gillian's point, emissions reductions in the power sector have been driven by a combination of huge investment in renewables by UK-wide policies, but also the reduction in coal, and, when it comes to Brexit, from SSE's perspective, the key thing that we want to maintain is the EMR principles, so things like the CFD auction, things like the capacity market and carbon price floor, I think that those elements can remain intact, but also we want to keep trading with the EEA on energy and the EC on energy. Given keeping energy supplies stable as in everyone's interests, we are hopeful that that can be achieved. I was also going to pick up what Lindsay said on PPAs. We've got optimism around the Scottish Government's proposals on PPAs, but I think that a lot more needs to be done in terms of exploring how they would actually work and if they would provide a solution. I think that I was also going to pick up on Beatrice, so Beatrice says that £2.6 billion of investment Beatrice is obviously offshore wind, so it's slightly different because there's still a mechanism in place to support that in terms of Government support. We use, especially with SSE, as much Indigenous supplies as we possibly can. We've just had great contracts awarded with Bifab and Babcock in Recythe, and we've got Wiccarber being renovated, 90 jobs created up there already, so we do do as much as we can, but I'll come back to you on the exact detail of what we're sourcing from abroad and what we're sourcing within the UK supply chain. I want to pick up that it sounds to me that a lot of this discussion has just been around electricity delivery again. It's very clear from both the energy strategy and the climate strategy that 50 per cent of our energy demand, at least, is for heat. We've got another challenge in decarbonising transport, and we also have to protect our industry from emissions charges, and I haven't heard any conversation about how to do all those yet. A lot of that is again within the gift. Some of those price support mechanisms, such as a renewable heat incentive, are in the remit of UK Government. There's a lot of wishful thinking about how we can support our industries to avoid carbon leakage or avoid closure or avoid migration to other parts of the world, but we should perhaps think about taking an even more positive view about how in Scotland are we going to be very assertive about this and to create low-carbon industrial zones, which can act not to preserve the past but to attract the future in low-carbon industrial manufacture and future low-carbon industrial exports from Scotland. Powering those or supplying heat and power to those is a slightly different question to what I think we've just been talking about, but it's a very big question indeed. Lindsay McRaid. I think that there's an interesting position within Scotland as well. Jenny mentioned earlier that we've just over 8.3 gigawatt of installed capacity, and I believe that there's another couple of gigawatt under construction, as we speak. That's a sizeable proportion of generation in Scotland. There's also 43,500 people employed in the low-carbon and renewable sector in Scotland. Again, it's a significant employer and a skilled workforce. It offers good careers, good and interesting careers to support that sector as well. With regard to the installed capacity that we have, although there's possibly limited opportunity to bring a wholesale manufacturer of turbines, for example, in, there is an opportunity in terms of the components. We've seen the likes of CS Wind investing in Camelton and McRahanish, and they continue to be used locally as well. There's also a huge opportunity in terms of the consumables of those sites, and remanufacturing is something that we've been speaking with enterprise agencies about extending the longevity and life extension prospects of that installed capacity that we have, so that we can continue to get good productive clean energy from those assets that we've already invested in. That could be things like blades, gearboxes, or the more consumable parts of the turbine. Classically, again, it's picked up in the documents that have been published. A planning consent was perhaps issued for 25 years. 25 years was the best estimate at the point of consent as to how long we would see those assets running for. Having gone through the experience of operating those assets for a prolonged period, we understand there's actually more that they can do. If we selectively invest in key components, we can extend the life and extend the production. It would be interesting to work on supply chain strategies to try and cultivate what we can develop in Scotland to support those plants. I'd like to come now to John Mason for further questions. To follow up, you said, Professor Hazeldane, about the relative amount we're expecting reduced emissions from electricity in comparison to other areas such as service or residential. Are we being unrealistic? Are we expecting too much reduction from electricity in comparison to some of those other sectors? I think that we've done phenomenally well on reducing the carbon intensity of our electricity. It's now down to something like 200 grams per kilowatt hour or something like this, so it's really, really low. We can progress further with the renewable electricity developments that we've talked about. I'm certain that we can deliver that. It may cost more than you think if Scotland has to bear the full cost of doing that, because at the moment the cost of all this is a lot of the cost is smeared out amongst the whole of the UK, and I don't think we fully account for that. What we also have to realise is that even with all this renewable capacity, renewable delivery still has the issue of being intermittent. It's variable through time. There are clearly periods of the year which can be hours, days or even weeks at a time when the delivery of electricity from wind power is nothing like the demand. It's unclear to me the moment that Scotland can go it alone on that basis because we need interconnectors to other countries—England, maybe other countries in Europe— which will allow us to import electricity as and when necessary, because we do that now with the closure of our thermal generating plant. There's a lot more arbitrage between Scotland and England than there used to be. We need to develop a lot more thinking about how we're going to store delivery of electricity. If we go on to think about the heat delivery to houses, businesses and industry, if you look at the graphs in the energy strategy, for example, which are usually around page 36 or page 20, the demand for heat varies by a factor of six through the year, and the heat energy supply is something like four or five times the electricity supply. How to decarbonise your heat is going to be a much more significant question. You've got a choice of, at the moment, a choice of electrifying everything so that you deliver your heat through electricity, which will be a very expensive way of doing that, or do you deliver your heat through other energy vectors such as hydrogen as discussed in these documents, which to me seems a very plausible method. But then we have to think about how we supply that hydrogen at a feasible cost, and so the cheapest way of providing hydrogen is through fossil fuels inversion. So delivering all this electricity seems very doable. Delivering the other three quarters, I think, we're still in the realm of knowing which direction we want to travel in, and we have to do some inventing and innovating on the way that it's premature to decide exactly how we're going to do that delivery. So renewing these types of documents every few years and reviewing where we've got to is very sensible, so we can't make final decisions yet. Right, so you've laid out just now the challenges that each of the sectors face. Are you happy that we go ahead with this expecting quite a lot from electricity at this stage and then see what happens in a few years' time, or do you feel at the moment we should be reducing our expectations of electricity and increasing our expectations in other sectors? I think we should be, if I repackage your question slightly, I think we should continue with developing renewables at appropriate cost, as has been outlined by the three other witnesses, but we also need to start very seriously working on how we're going to deliver the reductions in emissions on transport and industry and on heat, because those are much bigger challenges than we've faced so far. So we can continue steering as we are on electricity and expect to see 100 per cent renewable electricity as the default position, but to solve the other challenges needs a lot of serious work and we need to engage with other actors with that. Okay, thanks very much. If I could move on. The whole question of how much installed renewable capacity there is, and Ms Hogan-U referred to presently eight gigawatts, is that correct? We've got this quite wide range, it seems to me, of 11 to 17 by 2030, and if I'm correct, the Committee on Climate Change had a different, by 2020 they were talking about a different figure somewhere in between. I mean, there seem to be a lot of figures floating around and it seems to be very wide range, 11 to 17. I mean, is that just the way it is? Do we need to pin it down a bit more, or can you explain that to me? Sure, so yeah, I think that's a very important point to highlight and I was going to come back to that point anyway. So yes, it is quite a wide range. As I said earlier, we'd be very keen to focus on the higher end of that range. We believe that we do need to double existing capacity up to 2030, so that would be towards the 16, 17 gigawatt range in order to do that. I'd say that they're actually quite aligned with the Committee on Climate Change as well as other analysis such as WWF's recent analysis. They're all calling for a roundabout doubling of capacity in 2030 or by 2030. So I'd say they're more or less in the same ballpark. In terms of relating that to the previous question as well, there is obviously, CCS clearly has quite a big part of this strategy. It's critical, I think, to meeting the targets. We don't have a view on CCS or other non-renewbable technologies, but what I would say is that it would seem prudent to at least aim for the higher end of renewable electricity generation in case more innocent technologies take longer to develop or if there's any issues with meeting the expectations and the strategy given that they're at an earlier stage and just given the fact that so many of the renewable technologies are mature already and are in the pipeline and more or less ready to go. Maybe just touching on the heat as well. I think that the strategy is very, very ambitious on heat, which is great as well. I would agree with what Stewart says that this is absolutely critical as well. It's really been the Cinderella of renewable energy policies and more widely low-carbon energy policies. The targets for 94 per cent of non-domestic buildings and 80 per cent for domestic buildings to move on to low-carbon heat technologies in 2032 is very welcome but very stretching. There's not a huge amount of detail yet in the strategies to say exactly how those targets will be met and there does seem to be quite a lot of back-loading, so not much seems to be happening up to 2025 and then suddenly there's quite a big drop. That's something that we would really question is there not more that we can do on renewable heat now. There are technologies available in both renewable and low-carbon heat, particularly looking at off-gas grid areas and district heating and urban areas. We really urge to move as quickly as possible on regulation and other policy measures on heat. I think that some of my colleagues will delve into that a bit more deeply, but that's fine. Good morning. There's been quite a bit of emphasis put on the CCS as part of the strategies. The Scottish Government has said that it would like to see the UK Government's strategy aligned with Scottish energy priorities, but there doesn't seem to be any mention of it at all in the recent industrial strategy consultation that the UK Government put out, so it seems that might not be the case going forward. If we look at it, do you pronounce it? Is it BECCS or do you call it BEX? You do. By a fuel watch, we're talking about BEX and they said that it's overhyped. They said that massive scale-up is unproven. They said that it'd be highly complex. I'm wondering if the panel could give a view on whether they think what the feasibility is of CCS with these other technologies to deliver our negative emissions going forward. I can start from a business point of view. We obviously had Peterhead and the potential with Shell's CCS project, but I think it's a year past the autumn statement of 2015. We obviously had the announcement that that would no longer be the case. Since then, from an SSE perspective, CCS has not been something that we've been expecting any realistic route to market for any time. From any Government, UK or Scottish, or otherwise. SSE works on the basis of a mix of energy sources. We're obviously the largest renewables generator in the UK and Ireland, so we have a range of sources across the GB and Ireland network. CCS, in terms of the technology behind it and the mechanics of it, I suppose we wouldn't have a strong view that it should be pushed or otherwise, but if there was another opportunity that came up in a business context that might make it feasible, we probably would look at that, but at the moment we've not seen anything that suggests that that might happen anytime soon. Lindsay McQueen. Just to echo what Christine said, as the committee is probably aware, we undertook the largest study ever of a coal station in terms of the feed study that we undertook at Longannet with a review to establishing a 300 megawatt CCS project. That study was completed and the submission made to the UK Government and unfortunately the price point was too high. At £1.5 billion for the 300 megawatt project, the feeling was that it was just too expensive against the £1 billion cap that they'd set. I think that when we look at the cost of other technologies in there and particularly the impact as it then comes back to the consumer, we have to be very mindful of what we're actually asking the consumer to support through their energy bill. Having a competitive allocation for the most cost-effective technologies to come in and decarbonise the network is something that we should be looking at. CCS could play a role going forward but I think right now the price point is just a bit too high for us but that said going forward in the future if there was the opportunity to see that change, certainly something we would be looking at from a business perspective. On CCS then, I think that two main points straight away is that it's important to realise that we've been during the past 10 years that we've been talking about CCS being applied on to electricity generation and that's because of the obsession from the UK Government about fitting carbon capture and storage to decarbonise coal-fuelled electricity and coal-generated electricity. Clearly competing with low cost established electricity has been really difficult and it's very difficult to compete, to innovate anything big and to establish producers of electricity which are either running off power plant which has already been paid for and therefore has very low marginal cost or are running renewables which also have their own price subsidy and are therefore difficult to compete against. So it's no surprise that CCS has difficulty on power plant. Second point is that the way the competitions were set up by the UK Government meant that a huge amount of business risk and business problems were left with the developer and that was priced in to those very high prices which we've just heard about and I contrast that with other parts of the world where low carbon electricity is being delivered for around £100 a megawatt hour so about half or two thirds of what we were quoted for the UK and clearly that is something to do with the technology that the UK chose to develop that. I want to then move on to say that CCS isn't a single gadget it's a way of reducing carbon emissions in the energy system and so if we think about how we're going to travel down this decarbonisation route for effective low cost decarbonisation it's very instructive that the times model chooses to use carbon capture and storage because the times model is about optimising low cost delivery of decarbonisation across the whole energy system it's not just choosing CCS on electricity it can choose to do CCS on heat, on transport on industry and I think CCS applies to all of those areas and we should get out of the conversation about thinking about one direction for carbon capture and storage so if we think about how we're going to decarbonise our industry emissions from let's say the east of Scotland range mouth complex then CCS is the key way of doing that and we need to address that for the future if we think about how we're going to supply low carbon heating if we're going to supply that through the means of hydrogen we have to generate the hydrogen and CCS is a key part of that delivery if we think about how we're going to supply low carbon transport we could do that through electric vehicles but there are perfectly valid technologies emerging for hydrogen fuel cell vehicles which could provide much more consumer facing and consumer friendly vehicles and the hydrogen again can be supplied through the medium of CCS and the other way of thinking about fourth point is that we've thought about this as very very big projects in the UK driven by the UK Government and there's carbon capture CO2 separation from industrial wastes going on in Edinburgh right now this can happen at small scale, at medium scale and at large scale not just at immense power plant scale and part of the proposals we've put forward from University of Edinburgh Scottish carbon capture and storage which I can send to the committee later is that we should think about multiple tracks on this we don't have control over very large investment in a power plant that's a UK control but we do in Scotland have the ability to develop carbon capture transport and storage off these small and medium sized enterprises such as combined heat and power plants which use biomass such as brewing and distilling such as local small power units such as paper making such as glass making all of these are Scottish industries and health creation which are going to need decarbonising in the future and all of which are very in need of decarbonising their emissions before they get closed down by the European emissions trading scheme or whatever the replacement will be and so we have to start now and we can start now and develop all of those types of low carbon application so this is not just about electricity it's about looking at the energy economy Okay, so if I'm understanding you correctly we had questions about the idea of whether the CCS should be plan A but you seem to be saying it is certainly part of the initial plan but it would need to be with other things as well but we shouldn't be discounting it at this stage is that a fair summary? I'm saying that capturing carbon dioxide emissions is absolutely part of plan A but plan A is not just about electricity as is correctly pointed out in the times model plan A is across the whole of the energy use in Scotland and so in the climate strategy it's portrayed that we should go to negative emissions from 2027 onwards and that should continue now negative emissions is actually part of the trajectory towards 2050 because from the Paris 2015 United Nations agreement net zero economy around 2050 and as part of our emissions portfolio right now we claim about minus 10 million tonnes a year from forestry use that at the moment is accounted for by growing the trees if we want to use the trees and if we let's say want to convert those trees by burning them as biomass part of your question earlier on then just recycle, just burning those and putting the carbon back into the atmosphere is only part of the value the true value is in taking the carbon out of the atmosphere into trees creating a rural economy while reforesting large areas of Scotland using those trees in construction and also in fuel but taking the carbon dioxide emissions and putting that underground and you're quite right that BEX biomass carbon capture and storage does not exist on a commercial scale there are isolated examples around the world where carbon capture is happening on emissions which are derived from biomass by making ethanol by making alcohol for example that's very straight forward to capture the carbon dioxide from those sort of emissions so we could do that in Scotland on our distilling and our brewing industries for example that's carbon dioxide emissions going into atmospheres pure carbon dioxide now we could and should be thinking about capturing now there's no need to wait for this we can extend that if we want to do combined heat and power schemes using biomass then that's all very fine but that would still emit carbon into the atmosphere and it doesn't matter if that's carbon from biomass or carbon from fossil fuel that's still carbon so if we're going to do combined heat and power schemes we need to work out how we're going to catch the carbon from the fuel source in those schemes whether that's natural gas whether that's or biomass how are we going to do that and we haven't thought that through yet so all that needs what I'm saying we need to start off on the research push for doing that and the development push in conjunction with power and heat vendors that can be done I think there are clear examples and I think even biofuel watch will admit there are examples where gasification of biomass for example which is a much more efficient way of using biomass the gasification step is difficult that is claimed to have worked in a few instances around the world where there's been close cooperation between research and development and an equipment developer and that's now in Scotland we're facing this innovation frontier because we're first one of the first countries in the world to get as far as we've got so we're now facing the cutting edge challenge of what to do next and how to invent and how to develop the new technologies which we will need to get down our low carbon trajectory and the low carbon technologies which we can then design and sell on to other countries by doing that so this is an opportunity not a burden on opportunity to develop something new so again I say this is not just about renewable electricity this is about decarbonising the whole economy and it's clear from all energy models not just the one we've run times on Scotland but other countries have run times models other countries have run whole energy system models and carbon capture and storage is always included as an essential part of that whole system energy model so we can go away and run our times model again and again for Scotland but it will come out with the same result that we need CCS as an essential part of that all energy system and low carbon delivery okay thank you come on to a question from Bill Bowman thank you convener in the Scottish Government's energy strategy it said the following and I'll just read it because I think it's quite important in the absence of adequate storage capacity thermal electricity generation is required to provide important base load capacity and support the resilience of the electricity system sorry so if I can ask you is new thermal base load capacity necessary or desirable or both and how this might be built given the electricity industry's current reluctance to invest in new plant Christine MacKenzie and then Lindsay McQuaid it's probably more national good that can go into great detail on that but from our point of view we don't think it's problematic to security of supply that there's less thermal capacity simply in Scotland for example because we're part of an important GB wide marketplace and network the support for security of supply comes through that at the moment but I think we would welcome increased flexibility in Scotland given the new renewable assets that are coming on stream but I think that's probably a different topic I think probably I'll leave it the details of national good on that just come in on the back of that the role for new thermal is challenging in Scotland and in part attributable to the transmission charging regime and national good will be a place to respond to questions on that at the later session clearly that there has been decommissioning of thermal sites in Scotland but at the same time extensive investment in the infrastructure and network to ensure that we can continue to supply customers with the energy that they need roughly we are investing £3 million a day between our networks and our renewables business to ensure that the power gets to where it can be consumed it's a lot of investment that's happening in Scotland and we see that network continuing to work harder to transmit and get the cleaner energy to our consumer base considering flexibility more specifically we've undertaken work with industry colleagues and Imperial College of London to evaluate the impact of increasing renewable generation with increased flexibility onto the network and that considers the type of storage that goes from large scales such as pumped hydro through to batteries through to domestic scale and in essence you need a bit of everything there's no single technology that will solve the storage issue but having that storage and that backup capacity allows you to make the network much more efficiently and effectively with the renewable capacity that we've got and that analysis and the reports publicly available shows that if you invest relatively moderately in flexibility you can actually very efficiently reduce the overall costs associated with running the electricity network to the tune of something like £7 billion a year versus what we see just now so with increasing volumes of renewable generation as has been in part proposed by the energy strategy with some moderate increased improvement in flexibility you can actually get a fully functioning network Hogan and then Professor Ysilding Yes, I'll just echo what's being said already but just to emphasise I think the role of storage in the system Ofgem and Bays have recently run a call for evidence on flexibility options for the electricity system and energy storage is very much a crucial part of that. Also the UK's recent industrial strategy is very strong on storage and other forms of flexibility so UK-wide it's clearly seen as a key part of the mix to come and I think that shouldn't be underestimated and that's something that's also going to be particularly important if the strategy seems to say that we will be looking at increased electrification of rail and roads and heat networks in Scotland so I think the other thing just to highlight is the completion of the western HVDC cable in 2016-17 or later this year which will significantly enhance the capability of the transmission system and enable transfers from England and Wales to Scotland of up to about 3.9 gigawatts again National Grid and Ofgem can give you more detail later but just to highlight that increased capacity will obviously have a big impact on the amount of increased generation that we can sustain in Scotland I'm much less sanguine about the absence of storage capacity and I agree that we have storage to manage a variable delivery on timescales of minutes or hours or even perhaps a day with pumped storage capacity but I think we have we have no ability to handle a shortfall of renewable generation over multiple days and it's clear from weather patterns that that happens very regularly across the UK and across large parts of Europe and it's clear that even if we relied on interconnectors of electricity generation from Europe there are periods when the immediately surrounding 7, 8, 10 countries have no or very little renewable wind generation from those countries so it remains an entirely unanswered question to me about how we obtain secure electricity resilience supply without thermal generation I think the problem we're facing is that National Grid have developed a transmission charging policy a UK-wide policy and they have a UK-wide model for delivering electricity at a low cost way but that doesn't take into account regional generation patterns and regional security in Scotland is an important region of the UK and we've now experienced the loss of our embedded thermal capacity of generations through Longannet and Coquenzi and Peterhead only runs part times backup capacity remains an entirely open question for me and an unanswered question is what happens if there's a low of wind with a blocking high pressure weather system which goes on for 4, 5 or 6 days and we need to supply a large amount of electricity if we then can try and electrify our rail system we're supplying electric vehicles and we're trying to supply electrified heat we have no ability to have the storage capacity to back that up and so there are good reasons to suppose we should actually should actually look at how we back that up because at the moment we've got through the past few weeks by relying on import of electricity from the rest of the English grid through the interconnectors which already exist and through demand reduction in future we might want to consider regional pricing system for generation of electricity which would enable gas fuel power plant or integrated plant which could supply either electricity or hydrogen from the same plant such as the summit power proposition for Grangemouth we could choose to provide electricity or hydrogen from that or heat from that we could do that and we could also provide the CO2 takeaway service for that because it's again I point to the fact that there have been successive propositions for carbon capture and storage in Scotland and that's because Scotland has all of the infrastructure to provide very easy access to developing a thermal generation plant which can take away the carbon dioxide because we have the existing pipe work infrastructure on land we have the existing pipe work infrastructure we have the storage sites assessed ready for development as has been spoken about by Scottish Power and Scottish and Southern Electricity from the previous UK projects there's been well over 100 million pounds of UK Government investment in that and we could have those systems up and running by 2020 2021 if we wanted to and that would be a low carbon reinforcing development to support the types of renewables electricity delivery we've heard about and also to move forward with our heat delivery which we haven't really solved Thank you, Lindsay McQueen Just to to pick up on a couple of points that have been made with regard to investment in new build gas obviously we have the capacity market that Christine mentioned earlier on as an effective tool to try and stimulate that in part that's the effectiveness of that policy intervention that has been frustrated because of the pricing point of some of the technologies that are actually winning in that auction so we are seeing aged plant being able to compete effectively in that auction and outstrip any development of new generation that's a f*** concern to us and we would like to see we would like to see that mechanism reviewed in order to bring forward what the policy was intended to do and that was to bring forward new build gas I think in terms of where that new build gas would be located right now the pricing signals would tend for that to happen in the areas of England and Wales but the four gigawatt HVDC connection that Jenny mentioned is bidirectional so when the wind blows in Scotland we can export to England and Wales and when it doesn't blow in Scotland we can import generation from England and Wales so it's a very novel power connection the fact that it is bidirectional that's something that we've not had in Scotland before some of the constraint that we've experienced it's helpful to see that that change coming through and obviously there are plans afoot for further enhancement and upgrade of the network as well Andy Wightman Thank you convener I just want to move on to the residential sector where we've got quite ambitious targets of 76 per cent reduction of emissions by 2032 and to ask what views you have on how successful we've been since RPP2 and whether in fact the scale of reductions that's proposed is achievable I think that Jenny Hogan you said that we need to accelerate this and in your view there are technologies that are available now I wonder if people would like to comment on that I think that I've said more or less our view anyway but those technologies are available already they have various forms of renewable heats from different types of heat pumps to biomass boilers solar thermal and of course various district heating systems as well those technologies are available now they are being installed now I think that the renewable heat incentive was mentioned earlier as the UK system which has been recently reformed and extended we would want to see that continued beyond 2021 the continuation of those the installation of those technologies so it's unclear that there seems to be a focus mainly on energy efficiency up until 2025 and I absolutely recognise that energy efficiency is fundamental so we wouldn't dispute that but alongside that we need to also see renewable heat and other low carbon heat solutions rolled out sooner than 2025 so I'm not entirely clear on why that has been set out that way but we have a plan and strategy it's welcome however that we've got the consultation on local heat strategies which will certainly be responding to that consultation and broadly speaking seeing public sector take leadership in this area will be fundamental so we'd like to see more detail on how public sector and local authorities can be leading in terms of renewable and low carbon heat solutions I think that Christine MacKenzie and then Lindsay McQuaid We also welcome the Scottish Government's decision especially to designate energy efficiency as a national infrastructure priority improving the energy efficiency of housing stock we think is good to happen alongside decarbonisation of heat but as district heating is one area that's explored a lot to an SSE has done a lot of research in UK-wide and one of the lessons we've learned is our wineford estate in Maryhill compared to some of our London projects I think that real incentives at building planning standards level help to incentivise that market I think that we're going to submit to the consultation as well obviously in more detail but I think incentivising the private sector in Scotland around district heating would make a big difference I think things like a presumption in favour potentially a code of conduct or a body that oversees district heating in Scotland would be a good way forward and one of the key things for district heating that we've experienced is it's important to get the infrastructure in place for the district heating before worrying about what the fuel for that might be so you might start with the fossil fuel system but as long as you've got the district heating in place that can then be switched over to a carbon free source so it might not all come at once but the idea would be that it's incentivising that initial installation of the district heating our wineford was a retrofit but I think that most district heating is on new builds so those regulations at the beginning are critical to that just to pick up on energy efficiency there's obviously the on-going consultation with BAES just now on how energy efficiency and the mechanisms to support energy efficiency now clearly that has to conclude so that we can then understand how Scotland will deal with its own energy efficiency mechanism when we look forward to engaging the Scottish Government on that as well having a view that Scotland will have responsibility for its own budget to try and manage energy efficiency schemes is something that means that we can particularly address those issues that affect Scottish based consumers and target where it's needed I think one ask that we would have that we see the development of an energy efficiency market for those services right now we have existing schemes such as eco and very much that's an obligation on suppliers or retail suppliers to your consumers and the providers of energy efficiency mechanisms understand that that's an obligation on us that we must deliver against and it doesn't necessarily result in the most competitive of markets so I think having a clearer market mechanism market based mechanism would benefit the consumer in the long run and also ensure that that budget that the Scottish Government will be given can be put to best use and targeted to where it's most required Okay so I think going back to Andy Wightman's original question can we deliver on this and I think again it stands or falls on the heat delivery and how we deliver heat into a conversation about renewable heat warm water delivery systems and I suspect that's going to be really expensive on a whole system basis and again part of the strength of the times modelling is it will include what the infrastructure costs for delivering that heat system to lots of urban areas what that true costs will actually be it's very easy to talk about individual projects it's very easy to talk about fitting local heat systems in new build and all that's fine and good and we should consider that we should also consider improving efficiency in the existing housing stock but again if we go to the information we have present in the energy strategy on page 22 we've got the graph of heat delivery and in the winter the heat delivery is equivalent to an extra 10 to 15 gigawatts of heat during the day and night and that is hard to imagine delivering through renewable energy so we have to distinguish how we're going to deliver our heat is it through renewable energies somehow by building vast amounts of extra renewable energy and then I re-open the conversation about how we back that up for delivery when there's loads in renewables and about an interconnector of two or three or four gigawatts so we'd need another three or four of those interconnectors even presupposing that we could buy the power from England at time of low power shortage and we also need to consider do we want to go into an alternative energy vector such as hydrogen and maybe we're discussing that later I don't know but it's premature to decide I think at the moment are we going to deliver this heat through renewables or are we going to deliver this heat through a different low carbon vector such as hydrogen and that's a very very big decision which the climate plan talks about as potentials the energy plan talks about as potentials but I don't think we're at the point where we've done the analysis enough to make a final decision on that because it's clearly possible to deliver the hydrogen system through the existing methane gas network that's the potential possibility of that which means that you gain the benefit of several billions of pounds of already existing pipe work which you can replace one gas with a different gas and that makes conversion to a low carbon heat delivery system much much easier and much much more possible to examine and so the relevant organisation for that would be a Scottish Gas Networks witness or evidence from Scottish Gas Networks who are just starting on the analysis of that so again I'm worried that we are being put in the position of trying to choose too early before we've looked at the whole system costs and before we've looked at the true analysis of what the alternatives really are for heat delivery Thank you Jenny Hogan just wanted to come back in with a brief point Just a couple of points First of all I wanted to mention about business rates so district heating schemes at the moment have been effectively penalised in the way that they are calculated, their business rates are calculated and that's something that we've been speaking to the Scottish Government about trying to reassess and ensure that the methodology used for district heating schemes is fair and reflective similarly for on-site generations so for the likes of distilleries and how they use their heat and generate energy that's something that needs to be reviewed and looked at to ensure it's fair and proportionate and helps to reduce costs and just on that point about costs district heating schemes are already being delivered as Christine's highlighted and just to touch on the point about the variability if you like so we're looking at various types of technologies when it comes to the renewable supply so heat pumps for example biomass these are not variable technologies however recognise that they are still relatively early stage they are being developed in other countries and to some extent here but there's a huge amount of potential there electrification is very much part of the solution but I think that the key here is about having a mix and looking at different options and hydrogen may well be part of that further down the line it's obviously still at an early stage but we certainly welcome innovation and pilots in that area too so I think it's about requiring a variety but renewables will have to play a key role simply because we need to carbon and if we very much agree with the point that Christine made about ensuring that the infrastructure is there initially but ultimately we will fairly soon I think have to ensure that that can switch over to renewables at some point or other form of very low carbon heat supply thank you and moving on to Jackie Baillie I was fascinated by what Stuart Hazeldine just described to us and I'm curious if you have a sense that the Scottish Government is keeping a wide approach to looking at testing different options or do you think they're narrowing down to deliver it? My conversations with the civil servants in the Scottish Government suggest to me that there's a very strong interest in looking at the wide approach and so I would strongly advise the political masters of the civil servants to listen carefully to what the civil servants have to say about carrying on further analysis about the different options and again I'm really clear that we need to discriminate between renewable generated heat and low carbon heat and that's a really big decision which is not within the view or remit of any one of the four witnesses here because it's a whole national decision which again we need to take bearing in mind we're at the frontier of this innovation about how we're going to go down a low carbon route for Scotland as a country or as a large region of the UK, whichever way you like to look at it and what we do will be relevant for us and our geography there are big potential possibilities in co-benefits of hydrogen and they're not included in the times model because the model can't do everything and by that I mean if we go down a hydrogen route for heating and we have made available hydrogen as an energy vector in Scotland that opens up the possibility of fuel cells for vehicles in fleet transport for big trucks and for buses and for big transport because hydrogen's available it opens up the possibility of hydrogen for domestic transport for individual citizens so it's not at certainty that we should invest everything in electric cars for example when hydrogen technology is there in other countries it's maybe 5 or 10 years behind in its commercialisation but we're taking decisions here which will set a trajectory or pathway for Scotland for maybe 50 or 100 years so we shouldn't be rushing to make decisions without a true analysis of the evidence and again I'll go back to if we want to supply hydrogen at national scale because we can manufacture hydrogen from methane gas by splitting methane that's a really well established process you can buy in to do that we need to take away the carbon dioxide and store that we can do that and create a carbon dioxide storage industry because in Scotland we now own the poor space offshore Andy Wightman might know about that through the Crown Estate settlement so we can try and use our energy strategy to create new profitable offshore businesses so it's not just a single small sector we're talking about, it ramifies throughout that and again we can generate hydrogen from splitting gas we can generate hydrogen from splitting coal if we want to in a coal chemical plant with zero emissions that process was invented in Scotland or perfected in Scotland and has been used in daily use in parts of North America to generate gas from coal and we can then with the fullness of time as renewables become cheaper replace those fossil fuel generating hydrogen sources with renewable generation or have dispersed renewable generation of hydrogen around Scotland so this is a completely alternative type of vision which can include some fossil fuels some renewables because renewables have a key place in our future give us much greater resilience and much greater flexibility than relying on an all electric future Fascinating, let me go back to the questions, I just had to divert for a minute there convener we've seen an alphabet soup of energy efficiency programmes in the past, eco's been mentioned we've had heaps, now we've got seeps what's the difference aside from a variation of the alphabet I think it's the right approach and what else could we do Anybody? Who would like to take the alphabet question? Lindsay McQuaid I sympathise with the confusion that the multitude of acronyms can cause I think for us we would like to see greater consistency in how energy efficiency is approached it's not an easy one to solve and I think as part of that we would also like to see around the definition of fuel poverty to ensure that help is directed to where it's most needed and that sometimes those mechanisms that are set up doesn't necessarily mean that the funding is directed to those consumers that actually do require assistance with their energy consumption so I think given that there is that on-going review of the definition of fuel poverty that's something we would like to see concluded and then we can work towards it Going back to the comment I made previously about the Scottish Government having control of its own energy efficiency mechanism given that I represent a national supplier with consumers based across the United Kingdom as well we would like to see some consistency between the mechanisms that are with regard to energy efficiency that will operate in England and Wales as well as Scotland so that we can deliver best value for consumers and use the budgets that have been associated with energy efficiency most effectively I'm not going to be very detailed on this except to say that energy efficiency is a key metric of decarbonising your economy and recent global analyses show that how efficiently and how low a carbon you can make your energy system is the critical pathway towards arriving at net zero for 2020 and 2032 for staging points on the way I don't really mind how that's delivered which bit of the alphabet delivers it but we should be careful that I notice that the way it was attempted to be delivered through the green deal or whatever it was called in England was very not successful because it was basically a totally uncompetitive pricing mechanism and the house owner could borrow money at a much less cost and make their own energy efficiency alterations compared to a greater cost from the so-called help from the Government whereas the Scottish system of much more direct price support and much more direct help for home owners or home dwellers worked a lot better so I think we've got a good track record we should and this is again a long term proposition this is a 10 or 20 year proposition to produce much greater efficiency in our housing and in our transport and gradually in our industries and businesses as well Richard Leonard If I could come back to the domestic heating market one of the two of the most valued qualities in politics are honesty and credibility and one of the proposals in the Scottish Government's plan and strategy is that we will switch from an 80% reliance on gas today for domestic heating to in 15 years time an 80% reliance on low carbon technologies I mean as I look around gas smart meters are still being installed gas boilers are still being put in households the gas network is still being improved invested in how are we going to go from a position of 80% reliance on gas to 80% reliance on low carbon technologies in just 15 years time I'm asking all of you Richard Leonard If I go first this time then I think that's clearly really really difficult thing to do and part of that is a demand reduction which we've already had success in demand reduction since about 2005 or something we've had a 15% demand reduction partly through more efficient appliances partly through insulation and efficiency of houses we can anticipate maybe 10% or more demand reduction and behaviour change so some help will come from that and that's partly a low cost fitting of houses so if you go to and again I say that if you go to a low carbon option if that includes hydrogen you could deliver that in 15 years but it would be really it's really quite ambitious to do that but there's no harm in having ambition because that stretches people and we've discovered that through having ambition the cost of renewables has plummeted and the rate of delivery of renewables has increased so high ambition as we've said right at the start of this whole meeting high ambition is a very good pull through to help that I don't know whether you could achieve the build of renewable electricity in that timescale with identifying the sites actually constructing the equipment because remember to do this you'll need 10 to 15 gigawatts effectively of actual supply so you'll need 45 gigawatts of capacity from renewables to deliver that and I don't know if anybody in the delivery companies has got any idea at all how they're going to deliver that so if I personally had to make the decision I would say we'll have to have a moonshot project on converting the gas network to hydrogen because I could buy in some hydrogen generation equipment off the market and have that built within three to four years I could reopen the feeder 10 pipeline from central Scotland to St Fergus and take away the CO2 from generating that hydrogen and dispose of that CO2 offshore to make the low carbon ambition that be achieved and we could do that by 2020 so yes I could deliver that in 15 years but we'd have to know that that was a strong direction we were going to go in Thank you, Jenny Hogan Similarly I think I would echo your incredulous if that's the right word in terms of a huge amount of ambition and I think it is very stretching however I agree with Stewart that we welcome that ambition and I think that's certainly a good place to start First of all I think it's worth just highlighting that it's quite hard to see from the plan, the draft plan and the draft strategy exactly what the impact of each policy will be so for example how much policy measures that are planned would bring down the actual heat supply that would then be required how much is electrification likely to play a role and what would that therefore mean for what's left over but in terms of the types of things that will need to come into play so we've talked about district heating already and that will need regulation as soon as possible I mentioned business rates as well which will be key to that building standards, a huge amount of improvement I think we can still make there there's a bioenergy action plan consultation mentioned in the draft climate change plan which will come after the climate change plan is completed again what's going to be involved in that I think that will be crucial to how much of a role that biomass can play the planning system will have a great role to play so looking at examples like the London plan for example and the really quite transformative changes that they've managed to make and how can we learn about systems continuation of funding of course so Reef for example as mentioned along with other funding schemes I think as well we're expecting to see the UK's emission reduction plan sometime in the spring we hope and clearly the UK has got a long way to go in terms of heat and transport and there's not much sign yet other than continuation of the renewable heat incentive for how they are going to make those great changes so I think that some clues maybe touching on the point about hydrogen you know hydrogen does need to be really system wide UK wide I think to really succeed so there might be some clues in what we can see the UK doing and how Scotland can kind of link up with that and I think I also mentioned public sector leadership earlier and again I think that's going to be crucial so what more can the public sector do to champion and show the way for renewable and low energy and heat in particular and help drive that market forward so I think that's enough to start with for now Thank you Professor Heazardine you wanted to come back slightly because I think what we've just heard is that we actually really need to do the arithmetic on the feasibility of the delivery of all that so there's a certain amount of conversation about there are various policies and strategies and plans and whatever but it still comes back to as a part of the region of the UK if we wanted to decarbonise heat through renewable generation we need to build an immense amount of renewable electricity generation to do that and the arithmetic on that does not stack up in my view and so I welcome the challenge but I would like to see some sort of arithmetic on the delivery of that and maybe we're just not prepared for that and we should send in some extra information afterwards and that's fine but it didn't sound like we had a very clear answer either of us really but I think we've worked through a little bit on the hydrogen delivery so we'll very happily send in information for that we've not worked through the renewable delivery option so I can't speak for that personally but I just welcome the information Thank you very much Professor Just a very quick follow-up so are Scottish Power, for example and SSE, actively looking at district heating or actively looking at hydrogen as an alternative fuel source? I have quite a few district heating schemes across the UK in place and pilot in Mary Hill at Wineford but I suppose the thing to remember is we as energy companies are participants in a marketplace and we have a regulator we have government that drive the direction of policy and anything can be achieved if you really have the right incentives and laws in place to make it happen but I suppose at the moment this is a thinking stage of where exactly should we be going and we're happy to participate in our using obviously lots of business expertise and SSE in terms of thoughts but ultimately we're part of we're a participant in a marketplace and we must abide by what policy is decided so I guess we're working where we can with projects we're working with housing associations we're working with a number of social housing providers to try and make district heating happening and private sector down south and the building industry too so we are working towards it but we're exploring a range of business options it's not just that but as I said earlier we welcome that the Scottish Government has put this forward as a priority Linda McWood is targeting the person at the end of this change and approach as the consumer we all value being able to heat our homes and control that flexibility as well so whatever the solution will be with regard to decarbonisation of heat it has to be something that the consumer is willing to adopt and accept and I think aside from the arithmetic that we need to do as to what that optimal mix is going to be is about motivating and promoting the change in consumer behaviour that we'll need so that they will willingly adopt a lower carbon form of heat generation that should hopefully then allow us to achieve the targets that have been set out but yes, 15 years with that ambition in mind does seem challenging there are obviously workshops and various pieces of analysis running I believe there's a workshop this Thursday in fact that we'll be attending to discuss renewable heat so it's something again that we are very keen on understanding more about where we can best use our expertise as an energy retailer to service that requirement thank you very much and I'd like to thank all of our witnesses for coming in today we'll bring this session to a close and also invite all of the witnesses to make further submissions in writing on any points that they would like to or indeed perhaps on the last points mentioned by Professor Hazeldane so thank you very much for coming and we'll allow the current witnesses to leave and our next witnesses to take the panel thank you well good morning and thank you we'll recommence our session with our second panel this morning if I could thank our witnesses for coming in this morning as you're aware we're discussing the Scottish Government's climate change plan and energy strategy if I might introduce our next witnesses from left to right first of all Nicola Pitts who is the head of commercial frameworks gas for the national grid next we have Julian Leslie who is the head of electricity network development national grid followed by Kirsty Berg who is the partner in networks and the head of off-gem in Scotland and finally but not least Andy Burgess partner of energy systems integration off-gem if I might just start I think some of you were in for the previous session so you'll have heard at least some of the evidence from the previous witnesses I'm interested in your views on how the new plan relates to the previous plan how feasible and realistic the targets set out in it are and finally and perhaps most importantly what new opportunities does it present for the Scottish Government to develop and move things forward within the current framework here in Scotland I'm not sure who would like to start off on those three questions Nicola Pitts so very much welcome the plan and the strategy and very much welcome the fact that it's a multi strand approach and I think the challenge that we all have is what are the multiple levers that we can pull, not just the few I also welcome the fact that it's very positive about new technology and I feel that probably over the next decade we need to enter into a period of active experimentation and we've talked about some of the technologies here in order to make the shift I think the challenge and it very much came out in the last session is around how do we decarbonise heat particularly if we only focus on the household and how we get that cost and convenience that makes it palatable for households to change within the timescales and I think if we look at our history of adoption which I'm very happy to go into later if you would like that has been particularly slow so we might want to think of other options as to how we decarbonise heat rather than just focus on the household Kirsty Burke like I'm in for off-gen likewise we very much welcome the Scottish Government's plan and the energy strategy in terms of your first question feasibility of the targets that's not really for us to comment on that is very much the UK Government and the Scottish Government set the targets but what we need to make sure as for the regulator and national grade as well is to make sure that the market arrangements both in the markets and the arrangements covering network investments are fit for purpose to enable that strategy so we just need to be very clear about what our role is in this as opposed to Government that sets targets and holds the biggest policy levers to implement these targets thank you we'll come now to questions from Andy Wightman thank you convener policy outcome 1 in the climate change plan for electricity is to get the grid intensity down to below 50 grams of carbon dioxide per kilowatt hour given the department of energy climate change best case scenarios suggested that we might get to 100 grams per 2030 is 52 ambitious and how do we assess the extent of which we're getting to 50 in Scotland when we have a GB wide grid so it is a GB wide grid and I guess one of my observations around the plan is that we want to remember that this is a GB network is a GB grid and therefore a lot of the services and products that are in the plan are also available across the rest of GB you can measure and we can measure the energy consumption within Scotland we can compare that to the energy production within Scotland which the two are disaligned you can consume power based on consumer behaviour or as the production of power goes with the weather so you can do that trade off to say how many terawatt hours of energy have you consumed how many terawatt hours of energy have you delivered through renewables and you can do that equation the bulk of the time a lot of the wind power when it is wind in Scotland is going south into England and Wales and then on days like today and certainly through last summer you were importing a lot of energy from England and Wales so it's going the other way to make up for that shortfall so I guess it just depends on the benchmark as to how you want to consider energy consumption is it the time of use, carbon intensity and you see that that will vary through the year or you're just looking at your total volume of energy consumed against the total volume of energy generated and you can make a carbon assessment on that so I think you need to be very clear as to how you're going to and what basis that 50 grams is going to be calculated so you're saying in other words that it's a legitimate and indeed a valid target but it's not clear how it's going to be calculated as to whether we've succeeded because you've calculated one way and you have a very low carbon intensity you calculate the other way which is actually of every kilowatt hour consumed per year where the source of that energy came from then you're intending to be much higher but you're saying it's possible to do that that addresses that question Julian Martin had a supplementary to that question a supplementary based on what you're talking about being a GB wide grid specifically for Mr Leslie something that happened last week was Peterhead power station was penalised with higher costs in the capacity market option because of its geographical location in the north-east if it's a GB wide grid and Peterhead is obviously the only power station producing into that grid how can that be justified that you've got a GB based power station that's been penalised because of its geographical location so it is a GB wide market obviously the capacity auction meets the criteria to submit their price into the auction and then we run that process and then they get selected in terms of meeting network security Peterhead is an option and obviously it is a locational option in Scotland however we could meet the security of the grid without that power station being in place from a network security point of view the capacity mechanism is only one contract of many and obviously has commercially sensitive information so it can't divulge that here and contract that it could be successful in a range of other services that it provides to the grid but does that not threaten the security of a plant like Peterhead if because of its geographical location that it's unable to compete because of being penalised by transmission costs we're still being penalised that there's a locational charging regime in GB and there's a lot of assets between Peterhead and where most of the band is consumed and therefore there's a lot of network investment that happens on the back of that so locational charging is something that we have in the UK all the generators are subject to that equally and it's a competitive commercial decision for SSC and how they bid and how they play in that market I'll move on to a question from John Mason Thanks convener again at the previous session we had a bit of discussion around the installed renewable capacity and there's been various figures flowing around was questioning witnesses so I'd like to question you as well the the energy strategy talks about indicates that between 11 and 17 gigawatts of installed renewable capacity will be required by 2030 and then we also had the UK Committee on Climate Change highlighting a significant increase in the rate of renewable energy installation I mean they were saying that by 2020 we would need between 14 and 16 gigawatts and we'd need to increase the rate of deployment to 1.3 gigawatts per year are those figures that you recognise and I don't know if it's something you can comment on? I might hand over to national grid on this one so national grid forecast a range of scenarios for how what the energy system is going to develop and many parties industry companies and ourselves use these scenarios so it may be best to answer that question in the context of that scenario work so national grid produce four energy scenarios each year as Cassie just said one which is we meet the UK's government targets of the 34% renewables by 2020 we're on track to deliver that across GBW we also produce other scenarios going beyond 2020 which look at we meet the environmental targets so that's called slow progression we have another which is no progression which actually we just have a focus on conventional power plants and we move away from that renewable focus and we have something called consumer power which is where we have a very booming economy and people are electing to buy renewable goods and renewable products and switch renewable energy because they can afford to do so and it's the right thing to do and that allows us to give us a credible range of envelope incredible envelope in which to plan to operate our networking looking forward going all the way out to the mid 2030s in detail and then going out to 2050 at a higher level so we have this broad range of scenarios which we're hoping to head into all of our processes that sit behind that, the national grid operate in terms of network investment use that range of credible scenarios in order to test what investments should be made and when to make sure we get the most electricity network invested and delivered just in time to manage the constraints and be there ready to deliver the renewable objectives onto the network so in terms of the numbers I mean today we're sat in Scotland with 11.5 gigawatts of total generation contracted but that does include Peterhead and the two nuclear stations there's another 5 gigawatts out there which is consented but it isn't coming forward at this point and doesn't have any form of renewable incentive and then there's another 6 gigawatts out there which has a contract with national grid but is yet to go through the consenting process so we have a whole pipeline and a further 11 gigawatts of generation which we have contact with we have a contract with so that as of when the environment is in the right place sort of economic environment is in the right place so those projects are willing, enabled and ready to come forward to connect so that would bring total Scotland generation 5 gigawatts if all that came to fruition against a peak demand which is 1.5 hour a year of 5.4 gigawatts so you already double your peak demand and there's projects out there which would take you to quadruple your peak demand in terms of installed generation from renewables so can you explain to me how does the relationship work between what you decide as to where we're going over 10, 20, 15 years whatever it is and the likes of SSE and Scottish Power and all of them in other capacity is it purely through the contract mechanism is that how it all works? No, so our scenarios aren't just a view of the future there's not a plan, it's not a direction it's just giving us the ability to understand the range of possible future outcomes but obviously that is impacted hugely by policy, it's hugely impacted by market conditions and that's where SSE and SP they're looking at those market conditions of those technologies looking at the policy direction but it's down to the developers to decide where and when to invest in what technology. So would you say they were guided by your view even though it's not your plan that your view of the future requirements I mean it would be part of one of that many many inputs, it would be one of that many inputs to have a look at that, to get national grades views to where things are going. If I can come in on that point the system operator provides it the parties that actually invest in bill generation plant are private sector companies so they will do that based on the commercial viability of their plant so they actually take the decisions of what to invest in be that thermal plant or be that renewable plant but what is important and there's been some changes in the energy market setup recently is that there is somebody who provides some overview of plausible future scenarios making assumptions about who's going to invest where and when which is what Julianne was talking about so there's a bit into toing and froing, yes the developers will look at national grid scenario but fundamentally what they look at when they decide to invest is this available plant in light of future market conditions or any support there may be from Government and other sources and then is off-gem commenting on their assumptions or their decision making the company's decision making not directly so our role our role is manyfold but primarily twofold so we need to ensure that there is competition in the parts of the market that are competitive so in the supply market and the generation market what we're also responsible for doing is making sure that the network companies so in electricity that the transmission operators and the companies that operate the smaller distribution network line that they invest efficiently so they need to think about what are the plausible scenarios what is the generation that's going to come on and in light of that what kind of network should we build where so that the point of this scenario is that Julian is talking about helps a range of market participants including ourselves understand what the future looks like it is a consultative process so there is this real challenge to what national grid present and I think you will often change your scenarios in light of challenge from the consultation process but I do think it's quite helpful it's not centrally planned but somebody provides a fairly authoritative view on a range of different futures of what the energy system may look like Gil Panterson It's a question that I raised in the last session and I would like to continue that with regards to the Scottish Government reaching its target and the fact that subsidies have been taken away and that private sector be able to breach that gap and assist but the follow-up that I didn't make and I apologise to the folk at the time I never get the opportunity to would the answer be perhaps, probably get sacked for this if they could sack me that since capital is is a question here because it's big money that we're talking about right down the line a scheme for Governments to underwrite the capital is that happening or could that happen that is very much a question for government whether they want to so underwriting capital I suppose is another form of support you can have a range of support mechanisms you can have direct subsidies and you can underwrite the cost of capital and the decision as I said at the start the decision as to what targets the Government wants in terms of meeting climate change targets and then the high level policies it wants to support to use in order to achieve these are very much matters for Government so the extent to which Government wants to use subsidy tools that's for Government that's not really for us to comment on I suppose that what I'm asking with that I think the answer I got that private industry couldn't quite make up that difference it'd be challenging for them so effectively I'm asking would that assist would that be a request that we should consider as a Parliament is that something that may make the difference if it was available I think the main thing that business wants and obviously it is a PLC as well wants a stable investment climate and if possible the furthest look ahead as to what those Government policies may be in order for them to take the scenarios and then work out the market dynamics around that obviously if you do have changing Government policies or wider economic disruption then that tends to delay or halt investment decisions so I think if there was a stable economic climate and stable Government policy that was far enough ahead then that would produce enough signals for business to come forward and make those final investment decisions and I've got another question that's in regards I don't know if anyone got the herald yesterday and there's a question in there about sorry a letter about renewable technology technologies actually adding to CO2 emissions rather than reducing them and if I could just take a slice from that letter which is really interesting almost all wind turbines are induction generators and as the name suggests relatively small electrical currents from the UK national grid so that when the wind blows those currents are effectively amplified and are added to the national grid's capacity unfortunately because of the plusory nature of the wind this amplified electricity is of such poor quality that the grid will collapse as it cannot handle more than 10 per cent of the corrupting junk electricity at any moment in time I see all smiling I was having a wee laugh when I read this too but my background would suggest that's a spoof letter or maybe it's fake news but I just wondered if you could clarify and put in the record what you think so it is a spurious letter the power that's generated by a wind turbine it goes through a whole bunch of power electronics that comes on to our network therefore the power received from whatever source a generation meets the required standards industry standards and therefore whatever is happening within the turbine because it is true it is a low grade power but by the time it meets the grid it is of a high standard quality that meets the UK regulations on delivering that on Christmas day we had 47 per cent of the entire nations and only supplied by renewable generation so to say we can't do any more than 10 per cent is the highest sustained period of renewable generation we've ever had in the UK yeah, smashing thanks for that thank you we'll move on to Gillian Martin so we're talking in the last session about carbon capture and storage and I get a sense that we've got a real problem on our hands here given that the technology hasn't been developed to a state yet and of course the funding research was taken away about 18 months ago that affected my area greatly with me just being on the border of Peterhead a lot of people really quite keen to be at the forefront of that technology in the area what other options do you think and your expertise are available if this technology isn't developed it has been mentioned of course that CCS doesn't appear in the UK Government's plans and their strategy and what are the regulator and the system operator doing to help facilitate the development of this technology given that the time system came up with it and we've heard from the last session that every scenario comes up with CCS being crucial in the delivery of these targets so the scenarios that Gillian spoke about the ones that meet the 2050 carbon targets do have an element of carbon capture and storage I'm also leading a project within National Grid to look at the future of gas transmission and even looking at some of the medium and higher cases than those would cover would need to have carbon capture and storage within them as well as I understand it the elements that are needed for carbon capture and storage are all proven within themselves what hasn't been proven is perhaps that end-to-end process so we certainly think that we should be testing the viability of it and there's some research that the ETI did which said that without carbon capture and storage to meet our carbon targets would add 30 to 40 billion along to the cost of that so it does crop up in most of the studies that you look at so really it's a question of how we test the viability of that and the scalability of that and back to this panel and at what levels as well there's some interesting technology that was mentioned before which is converting the potential to convert leads to a hydrogen city but that would require carbon capture and storage so I go back to my opening comments about I feel that over the next decade as a whole industry and policy makers should be looking forward to how could we experiment in different types of technology because I think that's what will take us forward more broadly. Did we miss a trick with cancelling that project in the likes of Peterhead? It's obviously going to take some government investment in terms of research funding particularly in the light of Brexit to get as to where we want to be so what kind of message do you as obviously the system and regulator have to governments about the investment in this kind of technology to get to where we need to be? So I feel the competition ended abruptly and back to my previous comments about investment certainty then I think it would take some regional from the government for people to look at that as a serious option again. So you would like to see that study maybe been brought back on? Or carbon capture and storage or indeed carbon capture and use to be reconsidered? With a broader point I guess we're agnostic on carbon capture storage. Everything that we've heard means that it could be a game changer but it's not certain that it could become viable and obviously it will be a question of exploring when that might be but I think it's important not to put all our eggs in one basket so it's important not to plan for something which might be uncertain you have to plan for uncertainty generally but basically explore different ways of doing things which is why recently we've been looking at something called flexibility so how you make better use of the energy that we have today through exploring storage exploring demand side response so using energy at different times to even out the load across the system exploring the way in which technology can improve management of networks and generally exploring how the system can evolve with new forms of technology new ways of doing things and that could include hydrogen it could include CCS in future but it's important not to just follow one path and to allow for different possibilities because I think that there are probably technological developments out there that we don't know about sure I absolutely get that but CCS and the times model has come out and the climate change plan specifically as mentioned the CCS is a vital part of that and that variety of solutions to stopping carbon emissions Arsh Denham Thank you so we know from the plan that decarbonising heat is going to be a significant part of achieving the goals that we want to achieve we've currently got a very large gas network set up so if we want to go about repurposing that maybe to biomass or maybe to hydrogen I'm just seeking the panel's views on what they think would be the regulatory or maybe the system barriers to doing that so fortuitously at the local level there's been quite a mains replacement programme going on so in the case of hydrogen being able to transport hydrogen at the local level that would be much you know that is viable to do with the plastic pipe network we looking at the transmission system as in the sort of very much the bulk transfer a looking and a doing project at the moment to look at what impacts that would have on both our pipe work which tends to be steel but also on our compressor network which is the fleet that sort of pushes the gas around the network so we are looking at that in terms of the frameworks we have something called the gas safety management regulations which cover gas quality which sounds a little dull but it's extremely important and that looks at almost the composition of gas and essentially it replicates what we found in the continental shelf when we transitioned to gas that framework which is under the safety executive has been amended over time to allow things like biogases to come forward there's also some European standards that are very different to our own and so there's a study which is going on at the moment to look at those gas qualities and to really look as to whether we should move away from those either whether to a sort of wider specification that would have advantages with being able to bring forward different types of technologies or potentially be more attractive for people to bring different types of gases to Britain more generally so that's one example of the frameworks that we would need if we went down a hydrogen route then we've talked about how do we actually change over that you would probably need some form of carbon storage regime to take that carbon from the area as well and more generally we are looking at whether there is a product that we could deploy at a transmission level which is a smaller more agile connection but we also need to think about how we also change our frameworks and commercial regimes a quick connection in terms of the asset but also a quick connection in terms of the frameworks that go with it so there's lots of things that we can do to bring these forward and I talked before about us experimenting in terms of the technologies we also need to look at the frameworks to make sure that they are ready in time for those technologies to come forward because it's a very important question I mean it's the big question for Scotland Scotland is decarbonised electricity well mostly decarbonised electricity supply which is I think where you're coming from but how the heat is going to be decarbonised is the big question and uncertainty in the future and we're working on this we're starting our strategy work for the next set of price control so for the monopoly networks we set price controls and currently they run for eight years and for gas the next one is going to start in 2021-22 I think but we're already starting to think alongside with industry what might the network look like in the future because with heat we've got a range of options so you may have local district heating systems or you may have the gas network as it is or you may have the gas network with a sort of cleaner gas biogas or you may have the gas network with a significant amount of hydrogen and nobody knows yet exactly what it will look like so that's why it's important that parties including the network companies innovate to see how well different what works and what doesn't to put it simply and that was some of the examples you were talking through so hydrogen is obviously something people talk a lot about and you safely put on to the network and there's the project and Leeds is probably the most famous one that's trialling this and in our work as the monopoly regulator we've been very actively encouraging the companies to trial and innovate things monopoly companies are not famed for being innovators because unlike companies in the market sector they can't steal other people's customers so we actually have to put in place incentives there's a bit unfair in the companies but we we've put in place incentives for them to innovate partly by making the price control longer so that they can get some of the returns for their innovation but also very importantly through our network innovation competition where we hand out around 70 million a year to get the companies to innovate and trialling gas on the hydrogen network has been one is on gas quality seeing how can you manage with slightly lower gas quality standards now that might sound a little bit scary but I'm sure we'll come on to it it's important that you get the balance between what is cost effective and may work in the future alongside the environmental target so the gas quality issue you can potentially bring down costs for consumers and you can improve the level quality of the gas that goes through the pipes just to add to that one of the technologies which has probably been trialled a bit more in Europe which is power to gas so essentially soaking up excess renewables to create hydrogen to be injected into the gas pipes and if you do that at scale you can then almost blend some of the gas quality issues away so that's for example a project that we are looking at whether that's one for us to take forward under one of the network competitions but back to frameworks I think that also starts to bring out the issues around how the gas and electricity frameworks perhaps need to come together and operate in tandem at a wholesale level as we see more gas fired generation and you get some of the opportunities of how we work both the gas and electricity systems together to create the right outcome for consumers on energy as a whole so obviously if we want to stay on target we need to be decarbonising heat or significantly within the next 15 year time frame so for a lay person to understand how easy would it be to start injecting hydrogen into the gas network now so we would need to go through that process of looking at gas quality to make sure that it was safe but there's a project already underway to look at that you would then need some primary legislation to change the gas safety management but you think it's visible within that time frame thank you Jackie Baillie small point because I think Kirsty Berge invited this we've got opportunities for lots of different new technologies some we're not even aware of it is the cost to the consumer that I think we've left out of this discussion and I wonder is it off gems role whose role is it to actually say you know what this is going to be too expensive and there is a cut off point at which we have to balance what we do in the future shall I go first on this it's hugely important because I think you're dead right it's hugely important this is all about providing things for consumers who care about environmental targets but also care about costs whose responsibility is it it goes back to my point about so the Government sets the targets the Scottish Government and the UK Government sets the targets they also control the policy the very big policy instruments to meet those targets so they decide how much subsidies you may want for particular types of renewable generation nuclear plant that's very much a Government decision that we don't have a part in but as the regulator of gem we are also responsible for part of the cost chain and our role is to make sure that the market arrangements facilitate investment and use of the network and the cost of the network in the most efficient way so we need to work out what the future scenarios look like our big focus on this is to have a level playing field in terms of anything that happens on the network and how the network facilitates the connection of different generation our focus is on having a level playing field because we and Government parties get lobbied by lots of different parties who want support for their technologies and that can be it can be nuclear it can be marine, it can be CCS it can be wind but what's helpful for consumers is that it's simplifying somewhat but the most efficient technology that is needed to manage the transition to the new system wins out and ensuring access to the network and keeping the costs of the network down that is our role alongside the parties that build the network Thank you We'll move on to a question from Richard Leonard I've got a broader question but I wonder whether I could come back to Peter Head because energy supply is a strategic part of any economy and you've mentioned a few times about how powerful stations are being built in other parts of Britain presumably these are gas-fired stations predominantly in England where's the strategic sense of, because as I understand it from this morning's papers SSC are talking about Peter Head closing down where's the strategic sense in closing down an already existing gas-fired power station and then building new ones elsewhere in the grid strategically from a national point of view what sense that makes From a UK point of view the capacitor mechanism is set by government, is set by base as to what it is, their strategy as to what it's trying to purchase through that auction and obviously that auction is running and delivering secure sources of energy at a very very low cost that means that even the larger transmission connected new generation within England and Wales is just a large generation in Scotland it's also a large generation across England and Wales what it is favouring is favouring existing diesel and gas reciprocating engines which are already built in a lot of cases because they're supporting hospitals they're supporting industry and they're their backup generations and now there's another revenue stream for these industries and for these hospitals for an already existing asset it's also true though it is triggering some new build, some new build small gas reciprocating engines as well and ultimately that combines together to give the 50 gigawatts of capacity or circa 50 gigawatts of capacity that we believe that working with the government is the right level of capacity to ensure that we have a safe and secure energy network within GB but in times gone by and I'm not hacking back all that but in times gone by there was a regional dimension wasn't there to the electricity market and going back to the days when it was in public ownership you had the hydro board and South of Scotland electricity board excuse me and then the regional companies across England for example do you not see there to be at any purpose in having any kind of regional strategic dimension to the supply of this is part of my role I need to ensure that we have a safe and secure network that can deliver the energy required under any circumstance so we've just done a huge piece of work at the company of Scottish TOs transmission owners to look at even a post-Hunterston-Tornais post-Peterhead world to say will we have the existing network plus the reinforcement of coming will that network be able to supply the energy demands under a no wind under a high wind under a low water high water scenario and the conclusion to that work is that yes we can so it's back to my point you're part of an integrated GB transmission network therefore the energy that you need in Scotland is supplied as part of a GB network and is that report available is it published so it's part of the Scottish Energy Advisory Board it's an action we took from that we're reporting back to them on the 16th of February and following that there'll be a series of publications that will follow but there's two documents which are in the public domain one is the electricity 10 year statement which was published on the 30th of November and one which was published last Monday which looks at the future range of scenarios that we've talked about already overlays the network capability required on those which is the electricity 10 year statement so you can see where the pinch points are and then the network optioning assessment which is what we published last Monday details then the associated investment that meets that future range of scenarios and what is back to the consumer point of view what is the economic way that we can invest with the transmission companies to ensure we have a network that's fit for the future whilst ensuring we meet all those requirements for meeting demand you've got a five and a half gigawatt demand in Scotland peak that's one half an hour each year by the time we get to the end of this year you'll have a six gigawatt import capacity once the western HVDC is built so for that one half an hour we've already got a five and a megawatt surplus plus you'll always have some hydro there'll always be a bit of wind blowing somewhere so there's more enough margin now to meet your future demands in Scotland without any form of generation the sense that I'm getting from this and from other evidence that we've heard from previous witnesses is that Scotland is moving to a position where it will be considerably dependent upon renewables in the post-Tornais-Hunterson phase exclusively presumably on renewables but will be reliant on nuclear power and gas-fire generation from other parts of the GB market is that how you see it from a national grid point of view? No, it is a GB market so the economic forces and the frameworks and the rules are determined in the most economic solution to ensure we can meet the GB energy needs and that is what we're investing in our network to ensure that the future network is capable of that as the generation sources are moving but yeah, absolutely this is on a GB wide basis that your needs will be met within Scotland you could export up to six gigawatts which you need to do on a very windy day because you won't have the demand we've got all the generation but on a day when the wind stops blowing you can import energy from England and Wales of whatever form of that might be and with future and growing interconnection with Europe as well we will also have access to other renewable sources across Europe which will then flow into England and then meet that national demand Thank you, Bill Bowman I'll ask the question that I asked the last time but I think maybe you've touched on some of the parts of it so the Scottish Government energy strategy said that in the absence of adequate storage capacity thermal electricity generation is required to provide important base load capacity and support the resilience of the electricity system now the question I asked then was whether a new thermal base load capacity is necessary or desirable and how it might be built given the electricity industry's current reluctance to invest in new plant and the answer I think that most of the or at least three of the previous panel said was they pointed to the national grid and said the way you cost it it doesn't make sense for us to do this and maybe following up on June Martin's point earlier talking about the geographic basis of charging is this something you need to look at again then? so we're a firm believer in locational charges across GB however we do believe that with the rapid change and nature of generation on the network and how it's now used and a move to decentralise generation as well that we think that the time is now when we started work on looking at holistic charging review to to work out what is the most economic and cost effective way to charge for access to the transmission network but also to try and roll in access to the distribution network as well because there's two networks there's a transmission network like the motorways of the transmission network and then there's the distribution which is like your A&P roads so making sure that because there's a discrepancy in different charges across those two networks today so we're embarking on a piece of work to look at that holistic charging space to say what is the right way to charge for access to networks across GB I think that the the Scottish Government's statement that there is a thermal generation needed to maintain the resilience of the system is that not correct and you think you can maintain the resilience through your inter-connector yes the work that we've just completed is important to see how in a few weeks time demonstrates that with the right network investment that we've got time to do over the next 10 years or so that yes we can maintain the five and a half gigawatts of demand security that's required in Scotland Gil Paterson Thanks very much my question is related to the Scottish Government getting involved informing a company to deliver some of the services so I'm wondering if there's any legal impairment or regulatory requirement that would cause them maybe to fail in their endeavours and at the same time are there any risks and liabilities for the Scottish Government if they did become involved in forming a company for the energy market I'm happy to start with that one so we'll be speaking to the Scottish Government about what exactly the Government's energy company would do there are already a range of companies that provide in some areas have formed their own energy companies and we are very happy we work with them already we work with the Scottish Government on their plans we will just taking a step back we are seeing as well as innovation and technology we're also seeing a lot of innovation in business models as the energy system changes one of the areas is the desire for local energy companies or different kinds of energy companies and we're really keen to work with parties who are interested in this because we don't sit with all the best ideas ourselves, we are rather narrow thinking regulators but we really do want to work effectively with innovators to make sure that the companies come forward that they can bring new things for consumers be that environmental benefits, be that lower cost benefits but at the same time that consumers are protected and they know what they're buying into when they get a supply from a particular company so we haven't gone into a lot of detail with the Scottish Government yet we have some similar models for the kind of thing that they're proposing but we're very keen to work with them on this there's a couple of initiatives we've started fairly recently so one is the innovation link you go on our website and you can get help if you're thinking of setting up a new type of business to understand what the regulatory implications may be because we know the energy market isn't that simple and we don't want all the rules which in some sense are there for a good place to be a real barrier for entry for new business models we've also got what we call a regulatory sandbox which actually allows some new business models to trial things on a small scale to see how it works for them so you know welcome this initiative and we'll work with the Scottish Government to understand exactly what they want to do with the company and make sure, if it's a good thing for consumers that there aren't barriers in place for doing the right thing Okay, thanks so much for that we'll move on then to I think Andy Wightman had another question Yes, just thank you convener following up from that, there's a lot of interest in local energy networks in fact some commentators suggest that that is a key part of the way forward and we've heard from you, Kirsty on the regulatory side of it and a willingness to consider these and to help people develop their business models but in terms of the actual grid are we in a position where because we've built up a model of a GB grid that developing local systems might be problematic, we need to know or you're shaking your head so there's many examples already of local solutions either in place or in development so there's many regional constraints in our network that we can manage it through traditional ways by contracting with a transmission-based generation that wouldn't be the efficient thing to do so working with a relevant local distribution network operator we can install some smart black boxes on the network, I guess that's monitoring the system conditions and taking the right actions based against a set of commercial rules and transmission-based generation plus the larger transmission-based generation and also you get pockets of some great work that the distribution company is doing so the Nines project which is on, as at Shetland or Auckland, but they've gone for a full integrated diesel generator battery storage, consumer behaviour consumer device in the home combined with renewable energy and it's a fully integrated network and because of an island-based community it's cool to isolate that and get a real good working example of how a smart integrated energy system can work we're seeing pockets within UKPNs down in the south around some of the London projects we're seeing great innovation that's really bringing together energy production with energy consumption and smart devices that work in conjunction with the network as well so we'll just see more and more of this and just ourselves, National Grid and one of these network innovation funds we just want a project to look at that whole system transmission distribution interface to ensure that we are operating network on a whole system basis not just thinking about transmission and then distribution of their own thing really bringing these two things together which is essential as we move to a decentralised energy network of which Scotland you've been leading the way on that the distributed generation you have in Scotland has always been heading shoulders elsewhere in England and Wales the big push for a solar that we had in the last 12 months the very south now has more embedded distributed generation than it does in Scotland but the issues are the same we've worked very closely with Scottish Power Distribution and SSE Distribution in Scotland to find these innovative solutions and as technology progresses and as we get confidence that these black boxes do the right thing and work in the right way because I think of really seeing a big scale roll out of these types of network innovations because it's a lot cheaper to install a black box for the few days where the wind is really really high and the demand is really really low that it takes the right action rather than having to build new transmission just that they will get used for a few hours or a few days a year so it's an efficient way to maximise the capacity on the network The short answer therefore is you don't see from a regulatory point of view any significant barriers to developing a decentralised energy supply and consumption system From the regulatory perspective it's something we welcome we agree that the dividing line between the bigger networks and the smaller networks it's becoming merged there are more ways of making better use of energy there are lots of opportunities at a local level we are also looking at the implications of that for funding the long term costs of the infrastructure so the network infrastructure was built years ago in most cases the payback period is usually about 40 years we don't want to stifle any local developments but we want to make sure the costs of running the networks and the fixed costs of the networks are shared in a fair way amongst consumers generally given that we've got a primary duty for consumers what we wouldn't want to see is an increasingly small number of consumers who are dependent on the main infrastructure funding it all while more consumers go off grid and getting effectively a free ride despite the fact that the infrastructure is there as a backup so it has to be a fair sharing of the costs and that's an issue that we're actively looking at so we welcome local energy initiatives we welcome more and more happening locally but we need to make sure that consumers as a whole are treated fairly and the costs are apportioned in the right way thank you thank you very much I'd like to thank all of our witnesses if there are any other further points you'd like to submit in writing to the committee we'd be glad to receive these and I'll now close this session and we'll move into private session allowing the public gallery an opportunity to clear