 Good morning. This is the 16th meeting of the Economy, Jobs and Fair Work Committee. Now, in light of the terrible events in Manchester, we will commence proceedings today with a moment's silent reflection. Thank you. May I start this part of the meeting by asking everyone to turn their electrical devices to silent or turn them off if they will interfere with the sound system? For our visitors, there's no need to press any buttons. The microphones will be operated by the sound desk. Now, I have apologies from committee member Dean Lockhart, and one of our guests today, Duncan Burt, has been unavoidably delayed and will join us as soon as he is able. The first item on the agenda is item 1, which is a decision by the committee to take items 7 and 8 in private. Are we agreed on that? Thank you. Now, we will go to our evidence session and would simply remind members to keep their questions short and to the point and ask if our witnesses could attempt to do so likewise. Now, we have quite a number on our guest panel today, and not all of you will want to come in on every question, so no doubt you can indicate just by raising your hand if you wish to come in on a particular question or point. We'll start off by asking each of our guests to introduce themselves, and if they could just very briefly state their name, their organisation, their here to represent and also what that organisation does. I'll start with Joan McNaughton, who's sitting on my right. Thank you very much, convener, and thank you for the invitation. I chair the climate group, which is a global NGO, working with Governments like Scotland on delivering ambitious climate reduction targets. I sit on several academic boards and on some business boards, too. Good morning. I am Lindsay Roberts. I am the Senior Policy Manager at Scottish Renewables. Scottish Renewables is a trade association for companies working in renewable energy in Scotland. We represent around 270 members working right across the renewable sector. Good morning. I'm Nicholas Govins, Chief Executive of Community Energy Scotland, a registered Scottish charity. We have about 400 non-profit distributing community members, and our role is to build confidence, resilience and wealth at community level through sustainable energy development, and many of our members are involved in one way or another in energy projects across Scotland. Lawrence Slade, Chief Executive of Energy UK. We represent a very broad, diverse mix of generating companies with interests from hydro through to gas, renewables, wind onshore, offshore and nuclear, et cetera, but also around 22 supply businesses in the electricity and gas sector, for example spark energy through to the likes of SSE. I'm Gina Hanrahan, Acting Head of Policy at WWF Scotland. We're part of a global environmental network, global environmental NGO, and we predominantly work on providing policy solutions for a low-carbon future for Scotland. Climate and energy policy are our core focuses here that we also work on marine policy and delivering climate change act is our core agenda. I'm Mark Winskell, Senior Research Fellow at the University of Edinburgh. I also work for the UK Energy Research Centre, which is a UK-wide independent, publicly funded university-based whole systems interdisciplinary energy research centre. I'm also a director of climate exchange, which is the Scottish government-funded intermediary between the research and policy community on climate change in Scotland. Thank you very much. If I might start with a general question to our guests today, we're here to discuss the draft Scottish Government energy strategy. My first question is just to see what the panel's views are on the priorities that are set out in the draft strategy for energy supply over the coming decades. I'm just wondering who would like to come in on that first. Lindsay Roberts. At Scottish Renewables, we very much welcome the publication of the strategy. We welcome the priorities that are set out through it, and we welcome the vision. In particular, we are very pleased to see the 50 per cent all-energy target proposed in there. That is something that Scottish Renewables proposed ahead of the Scottish Parliamentary elections, and we were delighted to see that get-cross party support within the parties of the Scottish Parliament. I'm really pleased to see that in there. I think that our main overarching comment on it, though, is that the targets are ambitious. We believe that they're ambitious and feasible, but it's difficult to see from reading the strategy at the moment exactly how we're going to achieve them. We think that the strategy needs to look at slightly more detailed action plans that will show us the pathways and the very practical steps that need to be taken in order to realise those priorities in that vision. Thank you. Joan McNaughton. Thank you very much. I entirely endorse what Lindsay has said. I was very struck that the level of detail in the energy strategy was somewhat lower than in the climate change plan. I think that one has to read the two together, not least because of the importance of the priority given to energy efficiency, which is given good prominence. However, it may become even more important if some of the other priorities prove to be slightly difficult to achieve to the full extent set out in the strategy. The energy efficiency area is one where the Scottish Government has relatively more control. That may well be the area where, even though it's very ambitious, there could be, if you will, a safety valve to compensate for lack of achievement. I'd like to make one comment. I think that there will be quite a debate about whether there should be new thermal power generation. I know that there are different views on that. I think that merits further thought. The technologies for managing a system with a huge penetration of renewables are moving forward by leaps and bounds, not just on the digital side, but also some of the technologies in actually ramping up batteries and so forth storage. It may be that whatever amount of support for renewables is now thought to be necessary in the future, that will be relatively less so. Mark Winskell It's interesting that your question was about supply, which is the first question on the strategy consultation. The first question is of the 17 questions on the energy strategy. The first question is what are the priorities for energy supply over the coming decades? I think that what we have from the Government is an effort at integrated energy strategy making, which doesn't really do the job of integration all that successfully in the draft strategy document. What we have is a rather disaggregated presentation of the energy system. We start with a lot of information on supply, a lot of information on the characterisation of the current system. It is quite a short document compared to the climate change plan. There is no real integrated analysis of what kind of energy system. The energy strategy is looking towards 2050. The climate change plan was looking to the period to 2032. The climate change plan is a midterm, in energy terms, quite long in terms of political times, as I realised. 2030 is a midterm for the energy transition and 2050 is the long term transition by which we should be essentially running a decarbonised system. What we would really like to see is a kind of join-up between the climate change plan and the energy strategy in that we are on the road to the 2050 vision in the climate change plan, and then we see how the long-term picture looks. Obviously, when you are discussing anything in 2050, given what Jones correctly said, things are very dynamic in terms of distributed generation and storage and so on. It is very much a kind of a world of managing uncertainties, keeping some options open where they look promising, understanding what the key decision points are on the transition. All that really requires an integrated view of the whole energy system, which spans what levels of demand might we be expecting. How successfully can we get demand down? How much improvement can we get on efficiency right across the system from upstream downstream into homes and so on? That is quite difficult to do, of course, but the Scottish Government did commission a whole systems energy model to allow them to understand the basic evolution of the system over time. It is quite a familiar model for any of us who have been doing whole systems research. It is the same kind of basic model that has been used by the Committee on Climate Change for many years and the UK Energy Research Centre for many years. We have to say in terms of how the information is presented to us. It is not as integrated as we might have hoped, given that there is an integrated approach to things. It makes it rather difficult to have an evidence-based discussion about what we think are the priorities and so on. I know that this is the draft statement. I would call for a much more integrated, holistic statement based on some of the analysis that has been possible through the new model and lots of other evidence. I think that that is the only way that we can really understand how much effort is likely to be needed on supply side, how much effort is likely to be available to us on demand side, what kind of networks, what kind of scale of system evolution. None of those things are easy, but we do have to strive to put these all against each other in terms of the least-cost way of achieving system transition. Thank you. Laurence Slude. I think that Mark makes some very good points there. I think that we would echo the point around that you need a whole system approach. The overall priorities of the report are definitely supported. I think that the way that you are seeing technologies come together is absolutely essential that you consider the interactions between heat, power and transport in particular. I think that there is an element of requirement here that Mark was touching on, I think, around how you can future-proof the system work that you are doing. When you are looking at the period of time we are out to 2050, also the speed of technical development that we are seeing. Well, for the last few years, 15, I think, actually, we have seen reducing electricity demand. If we see significant uptake of EVs and if we see significant uptake of electrification of heat, you could see that demand curve going the other way. It is absolutely critical that you have intense look at energy efficiency, how you are managing the housing stock in Scotland, but it is also really important how you look at how all the various technologies can work together to provide a system that really supports Scotland going forward into the future. We strongly welcome the priorities in the strategy. We feel that the whole question of local supply, in other words, the direct supply from local generators to local demand, would benefit from a clearer vision of how that can be developed, and also a clearer sort of strategic process to cover both the technical issues that we are seeing. There are issues of matching local generation and local demand, as well as the financial, the contractual and the commercial arrangements necessary to make that happen. But we think the prize is quite a significant impact on local economies. We think the potential there is significant. We very much welcome the strategy. I think that it is a very exciting attempt at a much more integrated approach to mapping our energy system for the future. We are particularly happy that the 50 per cent target has been set for 2030 as an all-energy target, which we think will drive significant growth in the heat and transport sectors and do for those sectors what the electricity target has done in the past for the electricity sector. That is very significant. We advocated that for the last number of years and we produced a report together with Friends of the Earth Scotland and RSPV Scotland based on independent analysis by Ricardo AEA that showed that 50 per cent target is feasible and necessary to deliver on climate change targets, but it is feasible within existing technologies. I think that we agree with Lindsay that we would like to see a little bit more detail in the strategy in terms of the roadmaps for particular sectors, specifically in heat and transport. I think that there is a lack of clarity around the pathways for those sectors and we would like to see more actions to deliver on them. Of course, this cannot be read as a document in isolation from the climate change plan, which is its sister document, but even within the climate change plan there is not perhaps sufficient detailed actions to deliver on the ambitions for heat and transport particularly. We would like to see, for instance, much more action in the off-gas grid sector, where we know that we can get going quickly. We would like to see more action on heat decarbonisation for new bills, which is not built into the draft climate change plan because there is no point locking ourselves into a situation where we would have to retrofit new bill properties. We would like to see a quick roll-out of district heating networks, which is something that the Government is making good progress on, and we would like to see that move forward into primary legislation now. Thank you very much. I will now come on to a question from Gillian Martin. We are looking at the actions that have been set out in relation to the five key priorities. There is quite a lot that is requiring collaboration with the UK Government. Given that the UK Government's energy strategy—the UK Government, as it was, we do not know who is going to be the UK Government in a few days' time—two strategies seem to be diverging. The UK Government having an emphasis on things such as shale gas and nuclear energy. How realisable is the Scottish Government's strategy with that in the background? From our perspective, which is around the whole community energy side, there is a disconnect between certain aspects of the Scottish Government's strategy, given that they do not have their hands on some of the levers that are necessary to effect change. So, for example, in the whole area of electricity regulation, clearly that is a reserved matter. However, on the other hand, we have seen in practice in the nitty-gritty of development work, there is a reasonably strong shared agenda on some of the issues. So, I think Scotland has demonstrated a lot of practical development and innovation activity which the UK Government is interested in and often is interested in. So, whilst it does appear to be frustrating that disconnect, it is not a wholly negative feeling that there is scope to influence some of the aspects of the reserved matters of the UK. Mark Winskell. I think that this is a major issue. I think that the publication of the draft climate change plan and the draft energy strategy together, if you look at the kind of timescales for delivery, particularly in the climate change plan, because there is a sense of what needs to happen by when in the climate change plan. What they indicate is that there is an emerging kind of difference between governments now, which is probably for the first time we've seen this since the passage of the climate change acts in both governments. It raises a lot of questions in terms of deliverability, socialisation of costs and so on. Up till now, we've had a very clear level of alignment between governments so that some of the things that the Scottish Government are rightly proud of in terms of decarbonisation of the electricity sector and the expansion of renewables has been very significant with the UK Government. The UK Government is dependent on a similar direction of travel from both governments. We have to think through that a little bit. I think that the UK Government as was and that the dissolution did accept the fifth carbon budget advice of the Committee on Climate Change. At the highest level, there is still a commitment to a decarbonisation transition for the energy system. Beyond that, there are lots of questions about the extent to which the UK Government will support things that are heavily built into the energy strategy in the climate change plan. On electricity, carbon capture and storage is there in the Scottish Government's climate change plan as early as the mid-2020s. It becomes what they call a negative emissions factor because if you use carbon capture and storage with bioenergy, you get a negative bonus in your carbon budget. UK Government's latest projections show no CCS. This is the new department, the base department's central projections for 2035 show no CCS on the system. I think that the other concern is around heat, where the Scottish Government's plans are several years ahead in terms of the pace of the transition. I am talking about low-carbon heat supply from where the UK Government and the Committee on Climate Change imagine the heat transition. We have a UK version of energy system change now. If we look at what the Committee on Climate Change is saying for the UK, as well as some indications, we have not had a comprehensive statement from the UK Government on the emissions reduction plan. We will have to wait longer for that now. We have had some indications from the industrial strategy green paper and other statements about what the flavour of UK policy is likely to be. It is partly about the pace of change in that the UK Government is some years behind where the Scottish Government wants to be. It is also the direction of travel, so clearly the UK Government intends no further support for onshore wind. That is a big element of the Scottish transition. What that means in terms of affordability, deliverability and the relationship between Governments, I think that those are very significant questions going ahead. I agree with a lot of what Mark has said, but not with everything. Across Europe, we have a situation in which individual countries have different approaches to their supply mix. That in itself is not a bad thing, so some countries will have nuclear, some will not. That gives you diversity across that area. I would not be too concerned about a different approach to supply, subject to this. Clearly, the way in which you manage the connections between the two countries matters enormously. That is one of the issues in Europe, where if one country has an excess of renewables and exports that excess to other countries, they can find the economic case for some of their investments undermined. As Scotland is a net exporter, that is not likely to be a problem for Scotland as such. However, there will be issues around the approach to regulation and the approach to support. However, in terms of having a different mix, I do not think that that is the main thing. I agree with Mark that the approach to attribution of costs is absolutely crucial. That will matter because, when you have different mixes, different approaches to attribution of costs—in particular, how much of the system costs the renewable sector has to bear—could matter and be an impedance. I also think that the support systems matter more in some areas than in others. I would think that it matters more in relation to some of the newer technologies, the marine technologies in particular and offshore wind, even though prices are falling fast in the offshore wind sector. Onshore wind, we are not far away from being able to achieve subsidy-free onshore wind projects. We come back to the issue of cost and transmission costs and so forth, which could damage competitiveness if there were a rather crude approach to location. Obviously, there is a principle about having the sources located as near as possible to the demand, but in relation to wind, that does not make sense because some of the best sources of wind are remote. My final point in this area is on carbon capture and storage, which I have been working on since I was in the UK Government as long ago as 2003. I think that that one will matter, because I do not detect that the Scottish Government has confidence that it would be able to afford the money for a large-scale demonstrator of carbon capture and storage in the power sector. I do not know that we are likely to succeed in having the UK Government reverse its rather curious decision to abandon the support for carbon capture and storage. That matters a lot in relation to the power sector, but I note that the energy strategy says that the Scottish Government will look for opportunities to support small-scale demonstrations, particularly in industry. That is one of the problems with carbon capture and storage that everybody thinks is about coal, whereas in fact it is going to be needed for gas-fire power generation, but more than in the power sector, it is going to be needed in industrial processes where you do not have alternative technologies, the way you do have renewables in the power sector. That is probably one of the most difficult areas, and it is one where the strategy needs to think a little harder about how to get access to the results of demonstrations of carbon capture and storage abroad. There are links to some of the answers that we had for the first question about understanding those action plans and those pathways. Mark has mentioned that before. Part of the problem is that the strategy is deliberately quite flexible to enable lots of technologies and to future-proof and make sure that you are not shutting off options prematurely. There will be some points where we have to make some critical decisions that will shut off options. We need to understand what those critical decision points are along that path from 2013 to 2050 and who owns those decisions. That is the really important bit. It is not necessarily just the UK Government, but there are other regulated sectors that are in there as well and what the Scottish Government's role in each of those decision points is as well. I think that that would help us. Some of the problems that we raised in relation to the first question as well as this. Mark, again, for me, hit the nail on the head. It is not necessarily always about the direction of travel. It is the timing. I think that the timing is between what the UK Government and the Scottish Government are trying to achieve. A lot of areas are slightly off, particularly around, as Mark said, the heat sector, and certainly there are issues around CCS as well. Coming back to the subsidy and the onshore wind questions, the UK Government's own research shows that the most mature technologies, onshore wind solar and new onshore wind solar projects are the cheapest electricity providers that are out there, the cheapest options that we have. We think that it makes sense to maximise the resource, maximise the utilisation of that resource that we have in Scotland of our renewables capacity. That will help us to deal with some of the options, with some of the concerns and uncertainties that sit with the newer technologies such as CCS. Our renewables, we think, are a proven, a cheap, low-regrets option. The Scottish Government therefore has a role to make sure that it is using all of the devolved policy mechanisms that it has at its hand to make sure that our projects are as competitive as possible when we are working within that competitive CFD resource allocation framework. I think that a lot of the points that I wanted to make have been raised already, but I just wanted to hone in on one. While there is a huge reliance, of course, in the UK Government around CCS and the future of the gas grid, onshore wind and other issues, I think that this underscores the importance of doing what we can within our own powers. One area that I think the strategy could benefit from more detail and perhaps more ambition is around demand reduction. That is something that the Scottish Government has a lot of levers to deliver. At the moment, the strategy sets out that there is a forecast increase of 30% in electricity demand by 2030 as a result of heat and transport electrification. There is very little effort to manage that demand in the first place, which would obviously reduce the stresses on the system. While CEP is in there and is, I think, a very welcome development weak campaign long and hard for energy efficiency to be designated a national infrastructure priority, its level of ambition is relatively weak. It forecasts, I think, something in the region of a 10% overall heat demand increase from buildings rather than carrying on the level of efficiency savings that we've seen over recent years. Equally in transport, the modelling suggests that there's going to be a 27% increase in road miles through to the 2030s, and there's very little action within the plan to do anything to tackle that. There are a lot of levers that the Scottish Government has to enable demand reduction in transport. For instance, we could bring forward the policies that are hinted at in the climate change plan around things like workplace parking levies, air quality zones, et cetera, to actually manage demand. Some research was done for the Scottish Government, probably quite a few years ago now, by Atkins and Aberdeen University, which looked at various options for decarbonising the transport sector. Demand reduction options came out as the cheapest overall cost. I think that much more can be done on that aspect and that will in turn help to alleviate the stresses on the supply side. I think that we can pick up a little bit on Gina's comments looking at seeps and relating back to the question where policies between UK Government and Scottish Government are diversifying or moving apart. I think that the whole area of energy efficiency is one where Scotland has actually been ahead of the game in what it's achieved of late, and I think that it's to be welcomed that energy efficiency is being made an infrastructure priority here. The critical part is how Scotland's energy efficiency programmes develop in relationship to how those programmes in England and Wales develop. Why I say that is because a lot of the infrastructure and supply chains are related and a lot of the delivery mechanisms are related and a lot of the regulatory regimes are related by what off-geometry undertake. Whilst it's fantastic on the one hand that Scotland's taking a lead here and I think really is setting an example, we've got to look very carefully at how those programmes or that programme, how that then relates into the UK's programmes at a whole and the energy company obligation and how that functions. I think that more work is required there to make sure that the lead is maintained if you like, but the value that can be extracted from having a good strong supply chain is maintained. We'll move on to a question from Bill Bowman. Thank you, convener. I think that some of the questions may overlap a little bit in the topics. We've mentioned already the strategy for 2030 that all energy renewables target to deliver the equivalent of 50 per cent of Scotland's heat, transport and electricity consumption from renewable sources. For 2014, figures show that about 15 per cent of energy consumption came from renewables and of that renewable electricity made up about 50 per cent of the total. I think that most people have said that they accept the target is ambitious and they welcome it. Some have said that it's feasible and be interested to hear the sort of practical steps to make this feasible that you could put to individual... well, people in Scotland that they would find acceptable and workable and how in this the energy market may have to develop as well. Mark Winskell. I'll probably repeat myself a bit as I answer the questions. I think that there's a broad welcome from many stakeholders for the target. I suppose that at the highest level what we're interested in is the least cost path to achieve the kind of change that we need to achieve and where targets are useful and where more specific targets obviously favour whatever is being targeted in terms of every sector would like its technology to be represented with a specific target. We start with the target, which is essentially about supply, although I think that you can achieve the target through demand reduction as well as if you're maintaining a high renewables sector and reduced demand, then you're achieving a high percentage of demand met by renewables. Some of the concerns that I have about the target are, and I know that there will be different views around the table, that we haven't seen any kind of modelling work from the Scottish Government or representation of what their version of meeting that target looks like. There has been some independent work using a different kind of model and it was conducted through WWF and others. The Scottish Government's own analysis of how we might best meet that target, we haven't really seen, so we're not able to say too much about what the implications are for different sectors. What we know already is that, in 2030, given that it's not that many years away, some of the sectors are better able to respond over that time than others. I come back to heat here and one of my main concerns about that target is how much renewable heat is feasible to get into the Scottish system by 2030. If the 50 per cent target means that we have unrealistic assumptions about how much low-carbon heat supply, renewable heat supply we can achieve by that time, then I would have concerns. It's a little bit difficult because we haven't seen that analysis. We know that it's much easier to decarbonise electricity supply than heat supply. With transport, it's very much connected to the interconnection between electricity and transport, so that, again, a lot can be done. Where we might want to look more closely at the evidence is how much expectation there is on renewable heat contributing to that target. We said that it's ambitious, and it definitely is, but I think that that's what a target should be. You need to look at the success of the equivalent of 100 per cent for the renewables target as well to show the role that an ambitious target like that can play in driving the sector forward. We've already got around eight gigawatts of renewable energy capacity in the system. We've done a little bit of analysis, but we normally use WWFs work that they did with Ricardo as an independent bit of work as well. I'll let Gino go into the detail on that. By 2020, we'd be sitting around 28 per cent of our whole energy system coming from renewable energy. On top of that, up to 50 per cent, we think that in order to achieve that, we need to at least double our renewable energy capacity at the moment. Most of the analysis takes you into installed capacities around the 19 gigawatt mark. There's lots of different ways that you can skin this cat or you can slice the cake, but they generally fall out around that 19 gigawatt figure. The Scottish Government's strategy at the moment suggests that we'll need about 11 to 17 gigawatts of installed renewable energy capacity. We have a few questions around what that figure actually means and what it includes and how the analysis has come to that figure. That echoes Mark's points. We do have 12 gigawatts of renewables sitting already in the planning system. In that sense, add that to our existing eights and you're at 20 gigawatts already. It is an achievable target. There will be redundancy in those projects that are sitting in the pipeline. There will be projects in that existing eight gigawatts that aren't repowered, aren't renewed, so there will be redundancy there as well, which is why we seem to need more than double. We think that it is possible. It's in line with the Committee on Climate Change's advice as well as the lowest cost option to achieving our climate change targets. I think that you asked a very good question about how you communicate that to the public and the benefits of that to the public. The strategy itself is quite light in those areas and we think that it's going to have to be supported by a very large marketing communications plan. To agree with the energy generation, you don't need as much of that. It doesn't affect people's lives as quite directly as some of the things in the heat transition are going to. That may involve physically coming into your home and changing everything you do or how you use and live and work in your own home. It very directly affects people and we need to get better at communicating why those changes are happening and what the benefits of those changes are. Gina Hanrahan followed by Lauren Slade. Just to show the Committee the reports that we've all been talking about. Just to take you through some of the assumptions and scenarios that we ran in this report, which are slightly out of kilter with some areas of the Scottish Government's own work, as Lindsay said, it assumes about a doubling of electricity capacity as well within pipelines if we can find a route to market for that capacity to come through. In heat, we foresaw about a 40 per cent renewable heat penetration by 2030, so that's significantly less than the Scottish Government's 80 to 94 per cent penetration of low carbon heat by that stage. In transport, we saw about 18 per cent renewable transport content by 2030. That all sounds very difficult to understand for ordinary people. What does that all mean? I think that's a very, very important question and what we've tried to do in the report is set out what that means for your real life in some ways. That means that heat networks are expanded in urban areas. It means that a lot of properties, I think up to half of properties, will have some form of heat pump rather than gas boilers as they do now. It means that one in every two buses that we get on will be electric or low carbon and one in three cars will be electric. So there's very significant advances versus where we are today. They may sound like huge steps forward, but in many countries, there are already delivering significant growth in these sectors. For instance, in Norway, already over 40 per cent of new car sales are electric. There's a lot of talk and hype at the moment about the potential for electric vehicles to take off at pace. It is a huge transformation, but if we put in place the right policy framework to enable and support it with clear actions and we're very clear for the Scottish public about the direction that we're going in, I think that 50 per cent all energy isn't quite an easy one to communicate properly. We need to explain what that means. Then that will in itself create the kind of market drivers that will allow expansion, I think, because you'll be creating that consumer demand for those kind of products. I think echo the comments around the importance of onshore wind. It's perfectly clear that it is the cheapest form of low carbon generation, and it's frankly a bit ridiculous that it doesn't feature more strongly. Building on that point, I think that the committee in the Scottish Government shouldn't ignore the benefits that smart networks can bring. Duncan could probably talk about this a lot more if he was here, but by harnessing technology that's available on the grid today and using the electricity that we've got available to us in a more dynamic fashion, you can lessen the requirement for new generation to an extent. I think that the main point that I would make though is that you've actually got to use all of these elements together and we go back to the whole system approach in how you can actually bring new forms of storage on. So obviously there's a significant amount of hydro storage up in Scotland, but actually how can you bring battery storage into the grid? How you can combine battery storage with onshore wind so you can make better, more effective use of peak generation? How you can combine onshore wind storage and solar so you can make better use of midday peaks during the summer months? How you can combine that potentially with hydrogen creation for injection into the existing gas networks? So there's a lot of tools available to the likes of grid and to the likes of DNOs that we can actually use to make the system work more efficiently for us as we see, as Gina says, and as the WWF report says, we see growth increase. The point that I would really pick up on though is engagement and there is a vast challenge for us all in how we engage consumers in the importance of energy efficiency. It's not a popular topic to be talked about and there is an element of a significant amount of work required to make people understand the differences that they can make and the differences that we can help them make. We also shouldn't underestimate the challenge of actually going into every house and potentially replacing boilers with heat pumps etc. Those are huge engagement barriers to actually get over and the amount of time it will take just illustrates the challenge that we could have in terms of the heat strategy. For that, looking at the cost, the time, the engagement, it's really important that a strategy comes into play as soon as it possibly can if you're to meet the targets. Thank you and perhaps very briefly John McNaughton and then Nicholas Gobbins on this question. Thank you convener. Just picking up on Lawrence's point, the good news to that story is that there will be a huge number of jobs, but of course that creates its own challenge in building the necessary skills in our workforce. I absolutely agree about engagement and people have talked about this in terms of the willingness of the public if you will to come along on this journey, but I think there's another issue that we haven't mentioned yet and which is crucial and that is investment. We're really talking about an accelerated replacement of our capital stock. In cars, the lifetime of a car is what, 10, 15 years, so even at the exponential growth rates we're seeing on electric vehicles, we're going to need some acceleration of purchase and that's a big ask of individuals. We're going to need a huge increase in investment from project developers across all of the sectors, not just the electricity sector but heat and transport. You're looking at one of the biggest public and private sector investment challenges that we will ever have faced at an incredible pace. What we'll need to think about there and what the strategy I think doesn't really tackle as successfully as I would like is what the right balance is going to be between market mechanisms which will incentivise that investment and the necessary regulation to drive it forward faster than just the entrepreneurs developing the electric vehicles would. On that, I think there's going to have to be a place for regulation but the regulation's going to have to inspire confidence for people to start investing now because those investments then have to build the capacity, the supply chains and so forth. Of course you won't be able to get all of those regulations in exactly the right form first off so there will have to be adaptation as circumstances evolve, adaptation as new technologies come forward and so there will need to be some kind of confidence on the part of would-be investors that those changes are not going to be driven by political whim or irrelevant circumstances but are going to be delivered by clearly defined triggers like amount of penetration of a particular technology when perhaps subsidy can then start to be reduced, like availability for new technologies when they come, when costs change and perhaps signalled at specific time periods so that investors can have confidence to make the investment knowing that for a reasonable part of the life cycle of that investment something isn't going to come out of left field and leave them with stranded assets. To go back to your question, I think that the chances of meeting the targets are very low unless we have a quite significant mindset change in the way we talk about engagement or participation of people. Scotland is lucky in the sense that there's got a very high level of engaged citizens as it were in energy matters and we've led on community energy in the UK and Europe to some extent but we have to shift from this mindset about basically the energy system doing things to people to a mindset where there's much more of a sense of partnership of development of all the new technical opportunities for the way people engage with the system and benefit from it. If we can't get that mindset change and a very active programme of mobilising local groups and so on into engaging their local people into the whole new opportunity from energy, the scope to democratise our system, the energy system will be lost, which I think would be a tragedy. I see that we've been joined by Duncan Burt now. Welcome to this morning's session and as I've given others an opportunity to perhaps you could simply state the name of your organisation and very briefly what it does before we move on to a question from Richard Leonard. Thank you and apologies to all of the committee for being late this morning. My name is Duncan Burt. I'm head of operate the system for national grid. I work in the system operator section of national grid. National grid, as you know, owns the electricity transmission network in England and Wales and operates the transmission network for electricity across Great Britain and we also own and operate the gas transmission network across Great Britain. Thank you. Richard Leonard. Thanks very much, convener. I wonder if I could press the panellists a little bit more on what they've already said about onshore wind, because if my shorthand is correct, Joan McNaughton, you said that we were not far away from subsidy free onshore wind. Lindsay Roberts, I think you said we need to maximise resources. I wonder whether perhaps beginning with Joan McNaughton she could tell us more precisely how far away we are from being subsidy free onshore wind and maybe Lindsay Roberts could say in her description of maximising resources, does she include in that the need for continued public subsidy for onshore wind? I hope it won't be regarded as content of Parliament if I say no, I can't tell you. I don't have the figures and I didn't refresh my memory on them before I came, so I apologise for that. I have seen quite a lot recently around the reduction in costs of onshore wind and I'm sure there are people around this table who could give you a more precise feel. Just make a point that probably Lindsay might want to develop, and that is that a lot of the problems around getting access to our wind resources onshore now are as much in other areas like the planning system and connections to the grid as they are about the commercial viability of onshore wind. I'd be quite amazed if there weren't onshore wind projects that can survive without subsidy, but they have to get through the hurdles of the planning system and the connections to the grid. I think that they are both impeding the speed of deployment. I think that the planning issue is much more neurologic south of the border, but I don't think that it's completely absent in some communities up here. We actually had a report published just a couple of months ago by Beringa partners that looked at this very question. What Beringa found with us, to start with, the UK Government's own figures show that, like I said, the maturest technologies onshore wind and solar are now the cheapest forms of electricity production that we have. What Beringa partners did for us was look at the costs within the pipeline. They found that we could deliver about a gigawatt of projects that are sitting in that pipeline at the moment for no cost above the wholesale market price for power. Over their lifetime, they could actually be paying back more to the public purse. We believe that a POT 1 auction held 2018-19, so POT 1 is for established technologies under the CFD regime. Apologies for slipping into the technical language. That includes technologies like onshore wind and solar. Holding an auction under CFD for those technologies is absolutely critical. The key to delivery at those costs, equivalent to the wholesale price, if not paying back more to the public purse, is that CFD mechanism and providing that low-risk route to market. We feel that that is absolutely essential, that that mechanism is still there and available for onshore wind. In terms of John's comments on the planning system, I agree that that is an issue that is possibly more acute down south than it is in Scotland, but absolutely right. We are not completely clean of all sorts of planning issues in Scotland. Accompanying the energy strategy, the Scottish Government has also published the onshore wind policy statement. It sets out a variety of ideas in there for helping onshore wind in Scotland to be competitive but within a very robust planning regime that still takes account of all the social and environmental factors and considerations that we need to. There is an on-going piece of work in trying to look at some of those issues that we have in planning and address them at the same time as both the strategy itself commits and we will continue to commit to arguing for a pot-one auction. Gordon MacDonald wanted a quick follow-up on that. I should say to our witnesses that if any matter is raised, you can submit in writing further information on it at a later point, so no contempt of Parliament but the opportunity to fill it in on answers after today's session. You mentioned earlier that we need to double renewable capacity and that onshore wind is one of the cheapest ways to do that. You have talked about the difficulties with connections to the grid and planning, but is there any other economic impact that would benefit Scotland if we went down that route, i.e. in the creation of jobs in order to build that capacity to double the renewals? Absolutely. We think that holding that pot-one auction is delivering that extra one gigawatt of onshore winds in the system and could deliver more than £1 billion of private sector investment. I think that Gina's report suggests that 14,000 jobs are created in that region with the doubling of the renewable energy capacity as well. Absolutely. There are huge social and economic benefits in terms of investment and job creation to be brought around by the continued deployment of renewable energy. I think that there is one proposal in the energy strategy for power purchase agreements. I think that they could help a lot even if the pot-one auction is not available, because what we are after here is reducing risk. That risk feeds back into the cost of capital. The cost of capital is relatively much more important for renewables because they are high up-front capital costs and very low operating costs. Anything that could be done to help with the cost of capital. That might be an area where it would not be completely necessary to depend on the UK Government, even if that might be the surest and favoured route by a lot of the people in the sector. I welcome the PPA proposals that are within the strategy, but a lot of the analysis in the industry shows that market is not going to be big enough to bring forward the level of investment and the level of capacity in terms of onshore winds and other renewables that we need. It is a great option. It will work for some projects and we are fantastic to see the support for that in the strategy, but in and of itself it is not going to be enough, so we would still call for that pot-one auction to be held in 2018-19. Very quick follow-up from Jackie Baillie and then on to a question from Gil Paterson. We all welcome any additional jobs that would arise as a result of that, but is it not the case that existing jobs with existing investment have principally gone abroad because that is where the turbines are manufactured and is there anything to suggest that that would not be the case with the 14,000 jobs that are predicted? Our analysis is that we would have an extra billion pounds of investment in Scotland from delivering that one gigawatt, but there are lots of opportunities now in terms of repowering as well that is coming up. We are seeing lots of indigenous Scottish companies coming and speaking to us a lot more about the repowering market and opportunities that are in there. I think that we are trying to seize some of the jobs and the opportunity that we may have initially with the first launch of onshore winds being delivered elsewhere in the country. When we are seeing the offshore winds, there is a huge amount of investment in new job creation happening within the UK and within Scotland as well. We are seeing people getting excited about this next phase coming forward. Joan McNaughton raised that in her first answer to the committee on its internal electricity generation. I wonder if I can ask the rest of the panel if new thermal capacity is considered to actually be important and under what scenario Scotland might need the new thermal capacity. Maybe I could link another question to it. Do you consider whether re-empowering existing large-scale electricity to generating sites is more desirable than constructing a new one, and if so, why? Duncan Burr. Scotland has a very diverse range of generation sources, as I am sure you have covered already. Significant existing nuclear, alongside very large amounts of onshore and soon offshore wind. There is a large amount of hydro as well. Thermal capacity is a useful part of that mix. It provides capability to output power when the wind is not blowing or when the sun is not shining, or indeed if we have a particularly dry winter. It is not absolutely essential for the operation of the grid to have that thermal capacity in Scotland. We can operate the grid without it. Operating the grid without any large power stations as we foresee that we will have to do potentially towards the back end of the next decade with the potential closure of the nuclear sites as well. Does present some additional challenges, which we are still working on. We know that we can do it. It is just a question of the timing of investment and the technical measures that we need to take it. Nevertheless, on the one hand, I will say that we can do it. It is also very helpful to have that thermal generation there to help back up and support the grid. Lauren Slude. I think just to support what Duncan is saying there and refer back to one of my earlier comments that the way the system is operating has changed quite dramatically in the matter of a few short years. The way that we are looking at how generation is provided to the grid and the way that, for example, distributed generation is coming into play, combined heating power, storage that we have mentioned already. I think that to support what Duncan is saying, you have got to look at this from all sources of input into the grid and how you can bring those to play into a more dynamic grid going forward into the future. But also look at the way that the capacity market is functioning and how the energy market reform has processed in terms of bringing new generation into play looking ahead several years so you have that ability to plan and you have that ability to provide investors in confidence as to where things are going. Gina-Hunran. We commissioned some work a number of years ago to look at a kind of post-Hunterston, post-Tornes, post-Peterhead world where there might not be thermal capacity in Scotland to see what security of supply delivered and the analysis was done for us at the time by energy consultancy DNVGL. They found that in order to meet peak demand Scotland would have security of supply in the absence of thermal capacity in Scotland. Even under an extended period of low renewables security of supply was maintained. As Duncan says, it is not essential to have thermal capacity here, things can be done in its absence. I think that there are questions around wider system resilience that we need to think through very carefully. We have to ensure that the system is absolutely resilient as we decarbonise and perhaps Duncan can pick up on that a little bit more. I thought what was really interesting in the strategy was its description of the innovative work that is being undertaken to assess how small-scale distributed generation could play a role in maintaining system resilience that we do not have to think in the old norms of the past which are all about baseload generation. Now we are a much more distributed decentralised model where there are new system services being provided by new technologies and I think perhaps if Duncan could pick up on that that would be useful. Absolutely, thanks Gina. I am being brief on my first answer, I could talk on this for hours obviously, so I will try and go one level lower. I think Joan said earlier that we can see the world changing, we are trying to get that balance between markets and upfront regulation and direction right. We can see a number of ways in which the supply of electricity will evolve over the next 15 and 20 years. As Gina says, we can see very large amounts of distributed generation coming on, probably more than 50 per cent, certainly we operate at that kind of level in Scotland. A very significant potential role for storage, both highly distributed storage and also much larger sales storage and I think the one really important point to pick up on the strategy is not just the recognition of the very important future that Scotland can play in terms of pumped hydro storage for which it has significant additional capacity but also that there is a very big and burgeoning global growth in battery storage which may also play a very important role in Scotland. Those factors combined with a very large amount of distributed energy and the potential for further interconnection into Scotland all impinge on that resilience question post the closure of Tornes and Hunterston. I do not want to give a non-answer, I want to give a very clear answer but that clear answer is that there are a number of possible futures. We need to watch and track them very carefully and our intention is to work very closely with developers and investors in all sorts of markets to understand their appetite to make sure that we have viable routes to ensure that we have a resilient system. One final point is that it is important to recognise that networks I think will play a growing role in that resilience over the next 15 years. We already see that the security of the Scottish network with reduced thermal power is currently secured by the additional network investments made by Scottish power and Scottish and Southern over the last 10 years, both to help export renewables from Scotland but also help bring power into Scotland when those renewables aren't running. Additionally, I think that a growing focus on ensuring that we have a resilient network will be really important. I just want to say something a little different, which is from a consumer point of view the extent to which power is supplied by distributed local balancing, local storage versus large scale power generation and large scale storage. To some extent, the question about that in terms of consumer appetite is about what does it mean for me in terms of how much I'm going to pay for this. I sometimes think that we do get very caught up in conversations because we spend a lot of time talking to entrepreneurs, aggregators and so on who can spot the opportunity. That will undoubtedly be an increasing part of the way in the make-up of the energy system. I think that the point about trying to keep an overall understanding about its implications for total system cost because distributed generation still relies on large scale systems to provide overall balancing and reserve and so on. It sometimes feels like more of everything to me and I think that we just need to be careful about the extent to which we're covering the total system cost of some of these interesting, very dynamic opportunities. There's lots of cost reduction happening, but there's also still lots of cost reduction to get out of, for example, electrical storage, battery storage, compared to conventional ways of producing flexibility. I do think that this is a very evolving piece, but we shouldn't lose sight of total system cost and its impact on consumer bills. One of the things that's quite clear is that there's a reluctance to invest in new capacity, terminal capacity. I think that we've got a particular problem in Scotland simply because of the cost of transmission. Entrepreneurs, that's exactly what they are, they're not charities. It's difficult for me to understand why they would invest in Scotland because of this UK system that we've got, so what can we do about that? Is there not a need for some strategic thinking that we're dependent on someone else supplying the backup when we're short of electricity, if the wind stops blowing, for instance? I may get shocked by Lauren Slade for saying this, but I've talked to quite a lot of the companies south of the border to various people, and none of them would invest south of the border at the moment in new thermal capacity. The incentives are not adequate for an investment in a new thermal power station. There may be somebody out there who's just on the point of doing it to falsify what I've said, but the general consensus that I pick up is that the overall system, the mix of instruments at the moment, is not conducive to reaching an investment decision on a large power station. I think that, added to that, you have at the moment a view of not huge demand growth, although as electric vehicles penetrate and as we move to decarbonising the heat sector times to come, that demand will have to grow, but people are waiting to see how quickly that happens and how quickly and consistently the policies drive those processes before they will take a decision. On your point about back-up, I don't think that we should overlook the huge cost and other benefits of back-up through greater connectivity. It's another reason for sadness in terms of the vote to leave the European Union because there we were moving to a much more integrated energy market on both electricity and gas, which had cost and performance benefits across the region. It's possible still to have interconnection, even if we're not part of that market, but we'll have to be very careful and serious about the kind of negotiations we have over the terms of trade, if you will, on the interconnection. That is not impossible. It helps that our system operator has played a very leading role in that integration in years past and is well respected. I think that operator to operator we may continue to enjoy legacy benefits, if you will, but I wouldn't discount the cost and other benefits of interconnection just because problems over supply, peaks of demand all vary in different places, so you get some benefits just from wanting the stuff at a different time or having it available at a different time. I'll give a right to reply to Lauren Slade before we move on to Duncan Burt and then a question from John Mason. Yes, let's read very quickly. I don't necessarily disagree with what Joan said, but I think the policies that we have in place now will provide the signals to investors. Investors will invest logically when they see the appropriate signals in place. The forecasts that take place as part of the capacity market indicate how much generation capacity grid in the UK government are looking for one year ahead in the shorter auction, four years ahead in the long-term auction. Those forecasts will take into account when plants are coming offline, it will take into account demand growth, etc. Those are the signals for a GB-wide system that investors will respond in. There are other factors such as location issues that come into that part, but that's what the EMR process was designed for, that's what the capacity market is designed for. The industry can't forecast what those numbers will be next year, year after, year after, but there are various economic models that look at that. I also, though, haven't really mentioned and talked about demand side reduction, DSR at scale. The other element to all of this is, as I said before, how new technologies can be bought to bear. If you like how the toolbox that grid have at hand is expanding as we harness new technologies, as most importantly we prove that they can be delivered. Lastly, before I hand over to Duncan, a point on interconnectors. I don't think that we can underestimate the value of interconnectivity, both in terms of the GB system and also out to the island of Ireland, but also our interconnectivity with the near continent and some of the future plans for interconnections into Norway, for example, with 100 per cent renewable energy. I also think that having been involved in some early discussions in Brussels around this point, there is significant economic logic in the relationship, certainly around electricity and interconnectivity of Europe being maintained. There's a value to the continent in interconnectivity, there's a value to the GB system in interconnectivity and that shouldn't be lost when political discussions start as opposed to industry discussions. I would echo much of what Joan Lawrence is saying, just to pick up some of those key points in terms of charging and the cost of the network. We see continued, very active interest in the development of renewable energy in Scotland, which is a good sign for us. We have continued growth this year and next year in terms of those connections against the backdrop of the current charging framework, which gives us good encouragement. Those costs are reflecting the very significant upgrades going on in Scotland to facilitate the connection of that capacity. Alongside that, if we step back, there are a number of tools that we can use to help, as you say, take that strategic view of where the grid is going and where resilience is going over the next 15 years. It is really key that we do that. The measures that came in with the EMR and the capacity mechanism are part of that, to take a longer term view as to how we need capacity. Alongside that, we do a lot of work in our future energy scenarios and our system operability framework that are looking very carefully and stepwise at the next 30, 40 years, up to 2050 and beyond as to what and where we might need things in order to continue to enjoy the level of reliability that we've had. The big four axes in terms of flexibility in how we operate the grid really are to pick up many of the nouns that we've used already, interconnection and the enlargement and the spreading of the burden of security of supply across larger markets, which both increases the resilience of our own supply and also reduces costs to consumers by enlarging the market within which we trade. We hope to continue that very active trading in enlargement markets, even through Brexit. After interconnection, we have the growth of storage, albeit with questions around costs of battery but pump storage as well. Existing infrastructure around thermal plant, new and existing and small and large. Also on top of that, I haven't touched on this yet, but a very significant opportunity in demand side response where we run a very large GB wide campaign called Power Responsive, which is really around engaging major users, particularly industrial and commercial at this stage, in much more active management of their demand to both lower the carbon footprint of the energy that they take and also reduce their costs because energy tends to be cheaper when renewables are high. We see that scale of demand side response growth as something really fundamental to having a low carbon, active and flexible electricity market in the future. At the moment, it's really industrial and commercial. If you roll into the 2020s, you come into a major smart metering programme rollout and the impacts of that, we hope, will also be beneficial. So, interconnection, storage, demand side response and thermal all play a really big role in that. We'll look at that strategically, we will continue to, and think about whether the charges and frameworks that we have in place right across the regulatory framework are giving the right signals in the right way, including the location of thermal plant. Thanks, convener. Chapter 4 of the energy strategy talks about transforming Scotland's energy use. There are various actions, but one of the actions that says that the Scottish Government will make significant investment and employ targeted regulation to make Scotland's buildings near zero carbon by 2050 in a way that is socially and economically sustainable and supports Scotland's long term inclusive growth. So, I suppose I'm wondering, is that realistic, is that an achievable statement? Who would like to answer? Gina, and then Joe? The transformation of Scotland's buildings is absolutely essential if we're going to meet our climate change targets out to 2050. So, that's something that we know is a relatively low cost step that you would take in the overall decarbonisation. Building energy efficiency would come first and heat decarbonisation slightly later, but absolutely we need to get on with making sure that we have zero carbon homes in Scotland. We have alongside all these various different consultation documents, a consultation that's out at the moment on the SEEP energy efficiency programme, which is due to run for the domestic and non-domestic sectors through to the late 2030s, which should transform Scotland's built environment massively. We would argue that the targets that are set out for that at the moment are relatively weak, that the measures that are put in place aren't happening at the pace that they should over the next decade to pull people out of a fuel poverty and deliver the emission savings that we need to see. There's been a very broadly supported campaign to ask the Scottish Government to make all homes reach an energy performance standard of sea by 2025 as an important milestone for SEEP. That needs to be backed by the right financial incentives. The capital budget has a role to play in that, but we also have to unlock private sector investment. One of the key ways that we can do that is to regulate buildings in order to drive uptake of energy efficiency measures. One of the very welcome things that emerged over the last couple of months is another consultation on the regulation of energy efficiency in the private rented sector for Scotland. The Scottish Government is proposing to introduce new regulation for 2019 that the worst performing properties will have to be brought up to an energy performance standard of sea with the view to meeting a D standard in 2022. That will definitely help to regulate out, I suppose, the worst performing properties. This is a very long-scale programme, and we need to be very clear about what the targets and milestones are for it. We also need to do a lot more work to engage the non-domestic sector in what it means for them. Is there more of a challenge in the domestic or more of a challenge in the non-domestic? There is a massive challenge in terms of consumer engagement and getting into people's homes. There are so many homes in Scotland that we will have to tackle if we are to achieve proper heat decarbonisation and well-insulated homes. One of the things that has come out of the strategy is that there hasn't yet been the kind of level of engagement with the commercial sector on energy efficiency and heat decarbonisation that we need to see. There is a huge challenge there as well, and we need to engage closely over the next few years in the design and delivery of SEAP so that we are maximising the co-benefits of doing commercial and non-domestic at the same time as domestic where we can where there are synergies. John McNaughton Thank you, chair. Sometimes you see your past life flush before you. When I was working for the UK Government from which I retired in 2007, we did a lot of work on a zero carbon home standard. It was indeed introduced and it was to have been enacted for all new build from 2016. Lawrence referred to political decisions that regulation was overturned after the 2015 Westminster election. There is no reason at all why we shouldn't have that kind of requirement for all new build. We are way behind most of our continental partners on what we require of our housing stock. Retrofit is a bit more difficult and I don't feel particularly qualified either to agree that it's a rather leisurely pace of progress or that it's very demanding. However, I suspect that if you upped the ambition then you just upped the pace and whether you met the whole ambition or not you'd certainly do better. Key to this is in the domestic sector is enforcement because there's a long tradition of building regulations that are being complied with, if I can put it that way. Good enforcement is crucial. However, with the enforcement and with the right approach on the regulation, particularly to retrofit, you'd have considerable benefits in terms of jobs and the co-benefit on fuel poverty. On non-domestic, I think that it ought to be more straightforward. I mean, we've had quite a lot of really good work done by the carbon trust around working with businesses to get them to understand its enlightened self-interest and it feeds straight through into the bottom line because you're taking a cost out of the business. I mean, somebody said that business buildings are much more varied and that makes it more difficult? Well, I personally think that you would then consult with the business sector around how you will get a regulation that works and you can have a principle-based regulation, you can have an intensity or square footage-based regulation. There are ways around that you can do, but I think that one of the key things for businesses is to know that everyone else is in the same boat and that's why regulation is important to drive it, because if all shops have to abide by the same thing, then you're not giving one a competitive advantage to another. You're giving people the clarity that they've got to do it, but that's for consultation on pace and on the specific framing and making the framing quite goal-oriented gets you a long way towards avoiding problems over things like the variation in the stock. It just raises it on the business agenda because one of the problems is that if you're a very energy-intensive user, you're on to this already and if you're a really small business, you're probably on to it because it's one of the things you do. The medium-sized businesses are just not necessarily high enough up to the agenda. Briefly from Mark Winskell and then we'll move on to a question from Jackie Baillie. I just wanted to, because I think the question was about 2050, but there is a lot happening in this particular part of the system immediately. As Gina said, some of the more specific consultations that are running in parallel with the energy strategy are quite detailed in terms of powers to local authorities in this area. What we expect from local authorities in terms of delivering seep is a huge issue as well as the local heat and energy efficiency strategy. I've been involved in some of those consultations and I know there's quite a lot of concern at local authority level about their capacity to take on board some of the responsibilities that are built into these more specific consultations. We do need to think about where it's appropriate for Scottish Government to provide a central capacity to help local authorities. The pace of change built into seep is talking about £10 billion spend over the period of 2025, of which half of that would be public money, according to the existing homes alliance. This is a huge national programme. There are questions about the relative degree of getting demand down before you think about local heat supply because you're going a long way to minimise the level of intervention in the supply problem if you're able to do the demand side rightly. The committee needs to be a lot more kind of thought about what's going to happen over the next 10 years because there's a lot of things happening already in terms of regulatory consultation and so on. I wonder whether I could neatly kind of seek into demand side reduction and energy efficiency more generally. I'm very conscious that the Scottish Government helpfully exceeded their target last time round by a couple of percentage points, but obviously the EU has set a new target of 30 per cent by 2030. I wonder whether some of our witnesses, and maybe I could start with June, think that that's where we should be positioning the Scottish strategy. I am a lover of timetables and action plans so that we can measure as we go along exactly what we're doing. Would that be a sensible approach? Let me just throw in one final thing. Should we be looking to measure the final energy consumption and reduction in that, or should we allow for the impact of things like economic cycle, weather, which is a key talking point in Scotland always, and energy prices as well? I think that there would be advantage to aligning with the EU. As I've said before, I think that the extent of control over the potential for energy efficiency up here suggests to me that that's one to prioritise. It also does help with some of the other targets like the percentage of renewable energy. One of the concerns that I have is that it's not very much laboured in the energy strategy, but I think that too much weight is being placed on the potential of smart meters for demand side. I actually think that smart meters are going to be the new dog that doesn't bark in the way that people don't switch. There are reasons for that, and I think that the reasons are very similar. I just think that it will be wise not to place too much reliance on the contribution that can be made from smart meters. In terms of how you measure it, I know that looking at usage and forecasts, often the people involved can produce temperature-adjusted statistics, and my suggestion will be that you always need the actuals. Then, if you're looking for your trend, you need to correct for variations in relevant factors like weather, so there's no point in saying that you've done terribly well last winter if last winter was much warmer in terms of demand for heat reducing. You need to understand whether that's a structural adjustment or a one-off and what it means for your strategy and your targets. We would be very supportive of setting an ambitious target for Scotland for 2030. I think that there's an issue about to what extent we align exactly with the EU target or perhaps go further in terms of how it's expressed. The EU target is measured slightly differently from how we measure it at the moment in Scotland, which is in terms of final energy demand in Scotland. I think that there would be enormous value to continuing with the approach that we currently have. We're showing it's working, we're exceeding the target. Why would we change what's already clearly working? The EU has examined a number of different scenarios for the 2030 timeframe. Their analysis, which I think is done by Cambridge Econometrics for the European Commission, shows that there are massive macroeconomic benefits to the EU as a whole in terms of GDP growth, job creation, fossil fuel imports and even things like health bills if we go slightly further on energy efficiency than what's currently being considered at an EU level. What we would advocate is that Scotland sets a 30 per cent final energy demand reduction target for 2030. We think that there are huge benefits to that, but that has to be backed by appropriate actions to deliver on it. We're back to that point that we made at the beginning. The strategy is very good in terms of overall description of where we want to be, but not so good in terms of the action plan to deliver, particularly in areas like heat and transport. We know that we could be doing more in off-gas grid homes now to enhance take-up. We know that we could be doing more on energy efficiency in buildings. We also know that we need to put in place some actions to deliver demand reduction and transport, otherwise there will be impacts on the electricity grid if everybody shifts wholly to electric vehicles. We don't do things like trying to shift people from those vehicles in the first place through things like low-emission zones or workplace parking levies or other measures. Duncan Burt wanted to come in. I just to recognise a couple of points there. We would absolutely endorse, if you're looking at the long-term trend, you've got to temperature correct out for seasonal weather. For example, 2010 was a very cold year and you can see that on the graphs even in the strategy. Secondly, you can consider the next 10 years really in terms of decarbonisation as heat is sort of the calm before the storm. Before we expect decarbonisation of heat to really start deeply penetrating into the building infrastructure of the UK and of Scotland. You can see energy efficiency, insulation and energy efficiency is an infrastructure in its own right. Getting ahead of the curve and reducing demand now has a double whammy of not only capturing those efficiency benefits immediately but also it reduces how much you have to spend on decarbonisation later on as well. Exactly as Mark was saying earlier. Yes, we should temperature correct and look for trends, economic conditions and weather are the main two that we correct for but getting ahead of the curve gives you two bangs for your buck. Question now from Ash Denham. I'm interested in the panel's views on the proposal for a government-owned energy company and whether the panel think that that would help to support the development of local and community energy. And then also linked to that the proposal for the Scottish renewable energy bond and again whether that would allow savers or investors to support the renewable sector. Nicholas Gobbins. When we first heard of that we sort of were a little mixed in our response and we felt perhaps it was an idea looking for a problem but having worked through it in a bit more detail and certainly from the community perspective if we're going to see more and more extensive community-owned or community-engaged energy developments we're going to need to have much better economies of scale and we think that there are a number of sort of collective and facilitative roles that could be undertaken by some form of sort of co-ordinating organisation. It doesn't necessarily have to be a government one but if there were such an organisation then it could assist in a number of quite useful ways both in terms of new project development and also in helping to underwrite or guarantee or assist in the various things necessary to generate those economies of scale. Lindsay Roberts. I agree with a lot of those comments as well. I think from our perspective it depends, in the meetings that I've been at with Scottish Government officials and other stakeholders it really dispends where you start the conversation where you end up deciding what it should be. So it depends the stakeholders in the room and what their interests are and it's been from everything from a supply company through to a project developer through to just an information service provider. We don't seem to be any closer to narrowing down exactly what it should be doing. We agree with what strategy says. If it's created it has to add value. It shouldn't be duplicating things that are out there already. We're coming round to the view that it could be a very useful mechanism as a front door because there are a huge number of projects and organisations out there to help communities. Sometimes it's really difficult to know because there's so much support. Who do you go to first? Which door do you knock on? It's that kind of one-stop shop that begins to open that up for a community and help them to travel through the project development process or however it is that they're looking to get involved with renewable energy. In terms of the bonds, we had a paper produced for us by Snell Bridge a week while ago that was looking at the creation of a renewable energy bond. Again, we welcome its inclusion in the strategy. It's not a new idea by any stretch of imagination but we think there is something that could be done with existing community-owned reef assets that would help communities investing in these projects through this kind of mechanism. It's a very, very early stage proposal from us. We recognise that it needs a lot more input from financial experts and legal experts as well as how it works but we're pleased to see the idea in the strategy and working more closely with the Scottish Government on its development. Joan McNaughton. I agree with the two previous contributions but I just wanted to raise one other issue on this chapter if it's the appropriate time and that is that after a discussion around delivery, I think we then came to the Government-owned energy company concept. It's fine for the purpose for which it's devised but I think what I'm seeing is a lack of machinery for ensuring that the overall delivery is integrated. We started off by talking about the whole systems. A lot of these individual policy areas will be owned in different bits of government. They seem to have been co-ordinated rather effectively by the Cabinet Secretary-led Committee in terms of the aspirations of the strategy but I think how you execute that is just as important. I don't think you can have that oversight by a piece of, as it were, policy machinery at the political level. I think you need something that is closer to the practical side and some of the examples that were cited in the chapter of my memory serves me correctly are actually designed to do that. I mean, I think the Swedish Energy Agency in particular is there to help oversee execution and make sure that it's delivered in an integrated way across all the different sectors. So, for me, that's a question mark about, I think, that may be a gap and I think it maybe needs to be filled and I think there's a case for a bit of machinery that is distinct from the economic regulator and distinct from government but which has an accountability to report on what's actually being delivered to spot problems before they become a matter of post hoc accountability for not having been solved. Mark Winskell. So, I don't think there's any kind of straightforward answer to this. Again, it was one of these areas where we're sort of rather lacking detail in terms of what the Government has in mind in terms of the Government-owned energy company but I think it's the Danish Energy Agency that the Government is particularly interested in. I don't know a lot about that but I think it is quite directive in terms of central government in the Danish case issuing kind of implementation plans to local authorities and so on. That's a very different system where local authorities have a lot of control over their system so that would be quite a radical kind of change in terms or we'd have to think very carefully about how that would be applied to the UK system. I think a lot of these areas, there's an option of improved regulation of the existing ownership base rather than something a bit more transformative. One other just thing I suppose we're getting to the end but I think there is a bit of apparatus about given that this is such a dynamic kind of picture in terms of the degree to which this will be a highly decentralised system or we're still relying on more kind of national and international scale systems. I think there is a kind of challenge for any implementation body in terms of understanding the evidence base, understanding how long term plans need to be in terms of attracting investment and remaking that in the light of changing evidence. I think one of the problems we've seen with the energy strategy is that the Government is trying to do that to some extent be the analytical body as well as the kind of implementation body. That's quite difficult because the analysis becomes wrapped up in the political settlement. I think there's some separation of independent analytical assessment and then advising government that area needs strengthening in the Scottish case. There's some suggestion of that later on but I think the role for Committee on Climate Change or a similar type body based in Scotland as the evidence base is so dynamic, I think that's going to be really useful going ahead. Just two very brief points. One is that there is a Danish energy agency, there is also a Swedish energy agency which has the role that I described. Secondly, I had the Committee on Climate Change in mind when I was talking about post-hoc accountability. It's not there to spot problems early on and to help people to devise solutions. Although it's doing great work, I don't think that it's quite the kind of body that you need for the kind of role that I would like to see, which is around implementation and separating it off from the policy development process, if you will. Andy Wightman I want to get the panel's views on community and local energy. The strategy includes a new target of 2 gigawatts by 2030 in the sector. Of course, the sector is quite underdeveloped in the UK, Scotland and comparison to some other European countries. I don't know what the relevance of the target is to delivering the energy strategy. In particular, given that 90 per cent of the capacity is not community-owned, it's locally-owned, whether we need to look at that definition as well, how relevant is that? One or two of the projects that I was looking at under that are actually not owned, even in the UK. They're actually owned in the Netherlands and other European countries. I pick up that there's a bit of a retreat from community ownership in the strategy, which I may be a bit oversensitive on that. In answer to your question, it depends on what our mindset is on the value of community-led projects. We think very strongly that we're only going to meet these overall targets if we have a very engaged and informed public, which is, in our experience, being driven massively by community energy groups, local groups, who have been very active locally in developing and changing perceptions about what energy is about. Through the medium of developing a project, it may be an advanced multimillion pound wind farm, or it could be just a small facilities associated project. It's not so much, in my view, whether it's really significant or not. I would argue that we will never possibly get to the point that we're wanting to get through, as expressed in the ambition of this strategy, unless we have that level of engagement and, in our view, a continuing and higher level of community-owned and partnership-type projects. We certainly support more actions in the strategy for community-owned projects. I think that it's increasingly challenging in the competitive subsidy environment as well for communities to engage and understand and accept the risk profile that exists in that environment. With the closure of the feed-in tariff and the smaller-scale project sector, there are serious challenges, too. I think that there is a bit lacking in the strategy in support for feed-in tariff, smaller-scale projects that are more likely to be community-led projects, where you're going to see the achievement of those targets. The other target that's in there is shared ownership, as well. We have a lot of companies working and have actively delivered shared ownership projects to date, but that's another incredibly challenging target. It's going to be very difficult to implement in practice, given the framework that we're working in terms of the CFD. It's that understanding of the risk profile and what is a fair and acceptable risk to expose communities to and how you then account for that in a planning process. We all know the end point that we want to get to and what we want to achieve, but how we get there is very difficult. There's lots of nitty gritty that we need to be working out through the energy strategy, through the onshore wind policy statement and through guidance that's being produced by Local Energy Scotland with the Scottish Government at the moment on that. I wouldn't take my eye off the ball in terms of the challenges with the shared ownership target, as well as the community wind target, as well. Lauren Slade. I think that there's a good role to play here for good, solid policy and regulation that relates to those targets. To pick up on Lindsay's point about the level of risk that you're exposing a community to, a community is likely to be less or more risk averse than some commercial institution. If you've got the right policy and regulatory framework in place that provides investors and financiers with the reassurance around their return, it can provide the reassurance to local communities around their risk level. I think that on this point targets supporting in terms of how you bring that in, but be very careful about how you then link that into regulatory and policy regimes so that you can give local communities that comfort factor if you will about the level of risk that they're taking on. I think that we're about at the close of our session. Did any committee member have a follow-up on any point that had arisen Gordon MacDonald's? I'm just trying to understand the importance of interconnection. You talked earlier on about thermal demand, baseload demand being supplied from south of the border, if there wasn't Hunterston or Tornes. Can you say something about the importance of interconnection with France and with Netherlands? In my understanding of the final figures for 2015, which is the last year that they're complete, France imported 14,000 gigawatt hours and exported 174. In Netherlands, we imported 8,000 gigawatt hours and exported 7. Can you say the importance of interconnections, whether that's going to get worse or better over the years and in the result of a Brexit negotiation, what impact that could have on UK generation and Scottish energy strategy? My reference to interconnectors is really about the existing but also the future interconnectors as well. We have potentially additional interconnectors with France, right around the North Sea, up towards Norway, both into England and Norway, into Scotland. Those interconnectors, what they can do is provide swing, so they can feed into the UK when we've got reduced renewables output in the UK and then they can take some of that renewables output and help push it out into the continent when we've got an excess. So they help stabilise the price of power in the UK, they help investment as well. That's what they're doing. Those numbers you've got at the moment in terms of the current flow sound about right, that at the moment we see typically a balance to flow when we have high renewables in the UK, we see flow going out. At other times we see flow very often coming in because of renewables from Germany. As we look at Brexit, clearly there's a whole world of negotiations to happen before we get anywhere near that. We've said that there are real benefits to being still a part of the integrated energy market or as well integrated into that broader European energy market from which we derive a lot of benefits in terms of trade and security. Okay. Well, thank you very much to all of our guests for coming today. That concludes this session. I'll suspend the session for those members of the public sitting in the gallery. We will recommence at 12 o'clock. Thank you.