 Good morning, and welcome to the 19th meeting of the Economy, Jobs and Fair Work Committee. I have apologies from committee member Gil Paterson. May I remind everyone to turn off any electrical devices that might interfere with the sound system or to turn their devices to silent, please? Item 1 is a decision by the committee to take item 3 in private. The committee needs to decide whether consideration of its draft letter to the Scottish Government on draft energy strategy and a list of candidates for the post of adviser in connection with its forthcoming economic data enquiries should be taken in private at future meetings. Are we agreed that that should be done? Yes. Thank you. May I welcome this morning our panel of witnesses who are here to talk to us about the draft energy strategy. First of all, I am going from my left to right Emma Kelso, who is a partner in energy systems off-gym. Then Duncan Burt, who is the head of operate the system electricity from the national grid. Barbara Vest, director of generation energy UK. Professor Keith Bell, who is co-director of the UK energy research centre. Welcome to all of you this morning. I would like to start with a question about the actions that are set out in the energy strategy. I am sure that you will all be familiar with it. One of the actions called for in the energy strategy is that the grid constraints for a distributed power generation at local, regional and national level should be addressed. I am just wondering if any of you can comment on that. Witnesses do not need to respond to every question, depending on whether you feel you have something you want to contribute on that. There is also the possibility to submit written evidence after the session if an issue arises, which should be more comfortable dealing with on that basis. Who would like to start? We very much agree that the grid constraints need to be addressed and indeed are being addressed. There remain constraints right across the Scottish Network, particularly from north of Inverness, which will be corrected with the establishment of the Moray Firth HVDC link coming in over the next year, and with the completion of the western HVDC link from Glasgow down to Liverpool. Those two major investments by SSC for the first one and by Scottish Power and National Grid for the second one will relieve the residual major national constraints on the electrical network in Scotland. It is important for the committee to recognise that there will remain individual very localised constraints that may prevent a new connecting to the grid in the short term. I know that working with Scottish Power and SSC that they are working very hard to invest to remove those. Many of them are removed by a process called Connector Manage, which was implemented just under a decade ago in partnership with our cells at National Grid, Ofgem and the Scottish Transmission Companies, which has removed most of the development risk for connections from those parties, but there will remain some local constraints that are very much associated with the need to plan and consent local upgrades for those connections. However, it is an absolutely critical part of the investment environment that people understand those risks around planning and connection and that wherever possible, in balance with the democratic process around planning and construction, those are removed. Thank you. Anyone else wish to comment on that? I could just maybe add that the removal of constraints is important. It has to be at the right level, so it should be at a level that is economic. The impact of having some limits to the power flows on the network is that you cannot utilise the cheapest of the lowest carbon generation and have to replace it with something else, but clearly the reinforcement of the network itself has a cost. It is important that that balance has got right. I know that the three Transmission Companies, including National Grid and both the SO and TO parts, have got processes to try to undertake that cost-benefit analysis. It also applies, I think, at distribution network voltages. One of the parts that is highlighted in the energy strategy is about local energy or community energy or smaller-scale schemes, whatever their ownership is, but smaller schemes to connect into the distribution network. I think that there is room for improvement there across the whole of GB about the release of network capacity to prospective new users and doing that in the most cost-effective way. The balance between the extra network capacity and the impact of not always being able to use all of the available energy. It is a question of how much of the time and how much of the energy might not be used and what is the cost of that versus the cost of the upgrades and the planning permission for the upgrades, which is a big issue as well. Yes, certainly. I am a calso. I will just add briefly. I mean certainly second what Keith and Duncan have had to say. We very much see the investment that is already under way and planned as very important. As an economic regulator, it is really important for us that that investment is achieved in as an economic and efficient way as possible. I think that the other point to really note is that this is not just a single issue to deal with once and for all. It is a constantly shifting piece as we are seeing new technologies, as we are seeing that transition in terms of our generation mix. It is something that we are going to have to constantly keep our eye on and make sure that we are addressing on an on-going basis. Perhaps a follow-up question in terms of the energy strategy approach and the need for some overlap between the United Kingdom Government's approach and the Scottish Government's approach. How realistic is the energy strategy approach bearing in mind that there is overlap and some things may be dependent on a collaborative approach between the two Governments going forward? Does anyone wish to make some politically neutral comments on this? Barbara Vest, do you want to say something? I was just going to say that I thought the strategy looks ambitious. You have definitely set out your vision there, but you have used the word collaboration or collaborative approach, and that is really essential so that we all work together to get the best result. Scotland is leading the way, obviously, on renewables. We have the cheapest form of generation with onshore wind, and we can use the planning laws etc to encourage more of it. Where it is best located, which is Scotland, the north, Wales and the islands, we need to work together to achieve the right ends. I definitely think that the vision is there. It is having the collaborative approach to go ahead and deliver that. I do not see any contradiction between what the energy strategy is setting out in respect of the electricity system and the ambition. The role of the regulated electricity network utility is to facilitate whatever the market wants. There is a role to be played, and I think that this has been a successful role that the Scottish Government has taken over the last 10 or 15 years. It is creating that environment for investment and building up confidence for the market. The people who are developing the generation facilities in particular, to an extent attracting demand, whatever the new businesses are that are going to utilise the electrical energy. In terms of facilitation, the regulatory framework is important for that. As we were just talking about a few moments ago, about the economic development of the network and its facilities. I see no contradiction in terms of what the Scottish Government aspires to and what would be required by the licenses of the various network companies. There are some details to be worked out. Some of the market arrangements are, in my opinion, starting to struggle a little bit with the transition that we are familiar with for the whole electricity system. I think that there is a need for some deep consideration of what the solutions might be. In that respect, the Scottish Government does not have it within its gift to drive those, but it has already, I think, made quite a positive impact in terms of encouraging the UK-level debate on a lot of those things. There is a strong knowledge base within Scotland, not just within the civil service, but the fact that there are two transmission companies and distribution companies that have a strong base of knowledge internally that can inform the wider debate and the academic community and so on. The contribution is already there in terms of informing that wider GB discussion. I would look to that to continue because what we would want to get out of it would be good for Scotland, and it would be good for GB as well. Thank you. I will move on to a question from John Mason. Thanks, convener. The theme of balance is one that goes through a lot of the questions today. On the one hand, we have a lot of renewables coming through. Just yesterday, someone was visited in Methyl to say about the hydrogen work that is being done there, but it did strike me as that is still quite in the early stages. How reliant can we be on these renewable sources and how much should we be looking at thermal generation, and how much should we be looking at demand reduction? I find it difficult to get the balance in there. It is a great question. Scotland already has one of the lowest carbon grids in Europe and is leading in Europe with Portugal and Denmark in terms of the growth of renewables and decarbonisation. We see, as we look forward through the 2020s to 2030 and beyond, the need for a very low-carbon electricity grid to underpin the decarbonisation of transport and the heat sectors, which is recognised in the strategy. It is essential to that that will be a good mix of low-carbon sources, be they thermal with CCS, nuclear and renewables, all in the mix that we see going forward, particularly once growth in heat demand on electricity begins, which could be very significant and very peaky. We absolutely are confident that we have the tools and resources that we need to balance and retain the security of the grid under a wide range of scenarios over the next 15-20 years, both very high renewables grids but also grids with large thermal generation on them and nuclear on them. When we model the Scottish grid, as we have been doing with Scottish Power and SSC, we can see that it is perfectly feasible to operate the grid in Scotland solely on renewables. Indeed, that regularly occurs at the moment. The only large thermal power station left in Scotland is Peterhead, and it does not run very often. We have regular periods of time in which Scotland is entirely operating on renewable power. Would we need any new thermal? The implication of that is no. We can operate the grid without it. We are moving from a world where a lot of the arrangements were oriented around large thermal power to Keith's point about changes in the market. That has fundamentally changed over the past five years, and it will continue to change as those thermal power stations that are left operate less and less. I expect us to move to a world where there will be a lower number of residual thermal power stations left. Ideally, I would like to see those spread around the country in a relatively uniform way to give us options on how we manage the grid. That makes sense. That will require changes to arrangements over time, but that is something that we are looking at very closely with the Scottish companies and with industry as a whole. Do any of the others think that we are being over-optimistic about renewables, or maybe we are being not optimistic enough? Pens, what you are trying to achieve, whether you are looking at it in an optimistic way or a pessimistic way, I suppose. In terms of the need for thermal plant, as such, I would characterise the operation of the system and the ability to operate it under a wide range of conditions, being about scheduled resources. Resources that you can control or determine what they are going to be doing some period ahead of time—a few hours ahead, a day ahead. Wind and solar are not strictly schedulable in that sense. You can turn them down. If it is windy, you can switch them off, but if it is not windy, you cannot switch them on. You cannot switch the wind farms on. They are not quite the same thing. Conventional thermal generation is schedulable in that sense, albeit the nuclear plant, which makes use of steam so in a sense is thermal as well. The stations and the designs that we have had to date in Britain are not terribly flexible. They do have some flexibility and schedulability, therefore. However, these other resources could be hydro, inter-connectors, all sorts of other thermal plant. There are different options, but to be able to have this level of control under a range of circumstances does give the system operator a degree of comfort about making sure that, under wide-ranger situations—for example, bad weather that is coming through or whatever—that the supply to consumers will be continuous. I think that everyone else wants to come in as well, so perhaps start with Duncan, then Barbara and then Emma. To echo Keith's point of build on it, we have a very diverse range of sources that we can use alongside thermal, so we have the growth in pump storage, potentially particularly in Scotland. Battery storage is alongside that. The potential for demand-side services to play a significant role in future balancing and also interconnection both into Scotland and into the GB market more widely give us an awful lot of options to help operate that grid. It is worth bearing in mind that already renewables provide a significant number of services to the grid in terms of voltage support and our frequency support, which allow us to help operate the grid very securely with renewables in the way that we would have done historically with thermal plant. Even the most cold-hearted engineer looking at this can see that we have the ability to use other sources of controllable power to help manage the grid. The classic situation that everyone talks about is very low renewables. We know that we can operate Scotland under very, very low renewables. It is a question at a GB level where we get the alternative supplies from, whether that is pump storage, battery storage, demand-side etc. I was going to come at that from a different angle. It was about the operability of the system and what exactly the existing and new players can offer. We are seeing lots of what they call disruptor parties coming in. Aggregators, battery storage, that technology is improving. We have wind farms that are looking to repower, reconfigure their footprint to include solar and battery in order to maximise the capability of the connection. One of the things that the grid has said that it will look at is how we procure and attract ancillary services. We have done a bit of work recently on what the current procurement process is for ancillary services and what it might look like in the new world. I remember a bit techie many years ago being on a grid code panel. Some of the operatives at national grid having presumption about how a wind farm operated. Suddenly, someone might have said, have you ever been out to one to have a look at what is possible? A trip was organised up to one of the wind farms. I cannot remember which one it is. Suddenly, the blinkers were taken away, eyes were wider sources and grids could see what the operation of a wind farm was like. That was way back then. The technology has improved. We need to have a more collaborative approach to ancillary services provision and we need to get some of these new disruptors in around the table so that the grid can explain to them what the problem is on the grid, operability-wise, and then they can tell us about what the potential new solutions are. It has thrown away the old rulebook and the old approach, and it has been more collaborative and more collegiate to understand what the new possibilities are. It is not picking one winner, it could be a whole range of them working in tandem. I was going to make similar points about the role that demand side response and battery storage in particular can play in this area. Ofgem is currently working with UK Government and with wider stakeholders, including industry, to look at how we can make sure that there are not undue barriers to these technologies being able to emerge and continue to grow. Just picking up on the point about ancillary services, again, we are working closely with national grid. We think that it is important that there is as much transparency as possible in this area, particularly for new technologies, so that they can understand and have a conversation with national grid about how new technologies can participate in the various ancillary services that are on offer. I am sure that Duncan will be able to go into detail if you would like on some of the new services that national grid has brought in over the past couple of years to help with that transition to a lower carbon economy. I think that there is a follow-up in this area from Bill Bowman. If, although you might not agree, that thermal should continue in Scotland, but if it does for the next five, ten years, does the site that we have at Peterhead fit for purpose? Should it be refurbished or should we perhaps start again at one of the existing central belt former thermal sites? If it is okay, I will not comment on the particular strategy of an individual a separate company. What I would observe is that across Great Britain, the cost of establishment of the network to connect a power station is expensive and uncertain both in terms of planning and investment. Many parties have chosen to use existing sites for the construction of new power stations. Indeed, the most recent connecting CCGT at Carrington in New Manchester was built right next to an existing substation. That is usual that that happens. We see in our future energy scenarios that CCS has an important role to play in delivering the lowest-cost, low-carbon grid that we can get. CCS sites would necessarily tend to be on the east coast of England. Both Longallot and Peterhead sites have had historic discussions around CCS connection to them. Without getting into the particulars, the use of an existing site would seem entirely consistent with the strategies adopted by most power companies in the UK, and both of those look consistent with the CCS strategy. That is probably as far as I can go. I may be able to add briefly that it is up to the market to decide what sites to develop and what condition the existing sites are in, the existing equipment, what delivery of refurbishment or whatever comes up with a price for providing their services. As Duncan said, an existing site has obvious advantages. The procurement of enough generation capacity as a whole is a GB system, when we get a lot of benefits up here in Scotland from being part of a GB system, both in terms of supporting the times when it is low wind, for example, and providing a market when it is high wind. For a GB system as a whole, as we are aware of, there is a capacity market now that is intended to deliver enough as a whole. One thing that I think should be looked at is the locational value within that, because there are system operation services that come from a particular location. Part of it is to do with voltage control or managing the power flows under particular conditions relative to the network capacity. The way of coherently thinking of all of these different services together as a package is quite difficult at the moment when we have a range of different ancillary services that are procured in different ways. To be fair to National Grid, it is extremely hard to get best value out of those services, but sometimes there are reasons for having different services as well. There are different technical requirements, but the whole package and how that is considered is something that we should be looking at. That includes the locational value, if you want to put it like that. Just to come back on that, as Emma alluded today, we are doing a lot of work on how the markets for the services that we buy are a small proportion of the overall market for electricity—less than 1 per cent—but how those services that we buy change. In fact, today we are publishing something called the system needs and product strategy, which is our way of looking at saying that this is technically what we need to operate the system and this is how we think the markets for those services should evolve over the next 10 years. Alongside that, we have done major new tender rounds such as the enhanced frequency response tender, the largest effectively battery tender in the world about two years ago, bringing forward significant volumes of 200 MW of very fast control plant right across GB. There is a need and a response from us in terms of clarity and information to make sure that we facilitate that rapid transition. However, there will be questions for everyone during that, particularly in the investment cycle around existing and new power stations. Jackie Baillie I want to turn to transmission charging, principally because I think what you have had a review, there have been some conclusions of that review by Ofgem in 2014. Sorry, this is buzzing, which has put me off. In 2014 you went to a peak security tower for the year-round tower. Can somebody just explain the difference to me and the value of each? Numbers to hand, so if you haven't done it, you can go ahead. Will I come in on the more general framework? I haven't got the numbers actually. Do you want to do the more general framework? In terms of the overall framework, transmission chargers have two components to them. One is a cost-reflective charge and one is a residual charge. That means that the charges that any individual, either demand customers or households, businesses and so on, or indeed a generator will pay, will depend on where they are located and how they use the transmission network. As you said, we did do a significant piece of work that culminated in 2014-15 to overhaul those charges. As a result of that, we have seen quite significant reductions in charges for intermittent generators in particular, particularly for wind farms, and some smaller reductions for some thermal generators as well. Just to get an idea of what they were paying before and has it halved, is it? Off the top of my head, I believe that the numbers have come down for wind generators by approaching 20 per cent. That's a ballpark number. I suggest that we perhaps write to you with a more specific figure after the session. I think that that would be helpful given Scotland's reliance on wind generation, just to appreciate that. I wonder if you could set out the rule that transmission charging plays in encouraging new thermal generation. The historic framework provides for a locational signal in the charges to indicate where it will be more or less expensive to connect generation to the system. Generally, that's meant that charges for generation are higher in the north and particularly higher in Scotland and then lower as you get into the Midlands and the lowest or indeed negative in central London, where, of course, it would be very hard to build a large power station, where there's an awful lot of demand. That was reviewed at the last major review, as you say, and some adjustments were made to how that would work, particularly for the balanced, intermittent or variable generation. I see that continuing to develop. I've said already that the amount of thermal stations that are running is continuing to decline year on year as renewables become more and more prevalent, and that's particularly the case in Scotland. There is an on-going charging process discussion at the moment where SSE has raised a modification to look at the charging arrangements for thermal generation in Scotland. That's a proposal that would reduce significantly the charges for thermal generation in Scotland, and that's something that National Grid is supporting in terms of the adjustments that that would make to the signals. That reflects the fact that the way that network is being used is continuing to change and indeed is changing more rapidly than we would have expected even three or four years ago due to the continued growth of renewables, in particular solar in England, and continued robust growth of renewables in Scotland, which is both a fantastic thing for the decarbonisation of the grid, and also in terms of the continued growth of wind in Scotland, a signal that the revisions made over the last three years to charges have not stymied the continued growth of wind development in Scotland. Let me take this just slightly further. Sorry, and others may want to come in. You're very positive about renewables, and that's to be welcomed. I'm wondering, though, what new thermal capacity has been generated aside from the nuclear plant at Hinkley. I mean, I'm concerned, as you are, with keeping the lights on. Where is that new thermal coming from? Is it required or is it not? We will have, as of last year, we have a fully functioning capacity mechanism across Great Britain, which is setting, against a reliability standard that's agreed and confirmed by the Westminster Government, a target for the capacity market to deliver enough capacity to ensure continued and consistent reliability of supply at a GB level. Those processes are working very well, we think. In terms of the connection of new capacity, as I said, the last large thermal power station that is connected is Carrington near Manchester. We see regular participation of other large stations in the capacity mechanism. To date, there's been a very diverse range of successful participants in that, from the very large to the very small. I think that one of the important components is to recognise that, in future, security of supply is going to come from a very diverse range of sources. The large stations that we know and love from smaller sites can provide occasional power when it's needed for a few hours from batteries, from interconnection. One of the challenges that we face in industry is being able to look at these fundamental questions of national importance, such as security of supply and grid resilience, but look at them anew and not cling to the way we have run it for the last 20, 30 years, as Barbara says. We've all had to transform our own thinking as to how we can operate the grid to make sure that we get the best value for consumers out of the existing mix. Richard Leonard, do you think that there's a supplementary on this? Actually, I've got a very particular question that is not quite related to this directly. Do you want me to ask you a whole thing? Why not? Right, okay. I wanted to ask, because this is a Scottish Parliament committee, I wanted to ask about interconnections to the islands and where that stands. My source tells me that the Conservative Party manifesto in the election last week contained a commitment to island wind. I wonder whether you've already begun to think about the steps that you need to take to put in place the infrastructure, the interconnectors, that will bring that to fruition. Very active and ongoing conversation with SSC transmission and with Scottish power transmission. We have good plans in place and the technical plans available for the connection of island wind. The policies around how that's done and funded is very much a broader question for Government and off-trend, but we see no challenge with it other than, like any major piece of infrastructure, there's a significant engineering undertaking to build those links, but it can be done and we have the plans to do it. So you've got the technical plans to do it, but you don't have the budget for it? The funding, that's right. Don't need to come in briefly on off-gems role. Off-gems role is first of all to approve a connection if there's a case made. In doing that, we need to make sure that there is definitely going to be actual use of that cable. That's the first step that we go through. Once that has been agreed, then we can go through the usual processes and the usual charging regime would apply. Thank you. Now a question from Gordon MacDonald. Thank you very much, convener. I have a number of questions about Black Star and re-energising the system. The last time the committee looked at this two or three years ago, my understanding of the situation was that pump storage hydro would kick in first, followed by thermal conventional power stations and then nuclear plants. Longanets out the picture and we now have Peterhead that's filling the breach. What I wanted to ask you about was a letter from a national grid to off-gm dated May 2016. It says, for the purpose of Black Star, the country is split into six zones of which Scotland is one of those six zones. Two units per zone are required to Black Star simultaneously. National Grids policy states that three units should be contracted in each zone. Can you tell me how many units are contracted in Scotland? We have a number of units contracted in Scotland. The major contracts are with two of the pump storage stations, as you say. We have parallel contracts to thermal generation in order to restart. We don't discuss publicly the specific names and the detail of the stations involved, but I'm sure that the committee can… Thermal station other than Peterhead, which is located in Scotland, can be in that process? The Black Star contracts are specifically with the pump storage plant, and we have a number of smaller hydro stations that also participate in the initial Black Star to connect much of the demand in northern Scotland alongside the larger process of pump storage to large thermal plant. We have arrangements in place to use power stations in northern England alongside those available in Scotland should we need to in order to facilitate a speedy Black Star of Scotland. In terms of the timescale for Black Star, I'm happy for other members of the committee to come in rather than to have a conversation between Duncan Burr and myself. In terms of the timescale for Black Star, my understanding is that you are hoping to get 95 per cent of Scotland up and running within 24 hours. However, that same letter said that within 12 hours of a total system shutdown, national grid's electricity transmission strategy in the event of Black Star is designed to achieve restoration of the network within industry-expected 12 hours. Why Scotland 24 when you're expecting to do 12? I need to check the precise wording of the letter. Our standards haven't changed, which is that we expect to get about 95 per cent of the network. The vast majority of the network energised within the first 24 hours, alongside that to achieve the restoration of around 60 per cent of demand at a GB level. We expect that to be spread broadly uniformly across Great Britain as well. Within the components of how we do that Black Star, we have changed our strategy over the last three years and we continue to adjust it to bring more options and more competition into the market as the number of thermal power stations that we have available declines. We've moved to what we call a spinal strategy, which, when we're gradually moving to a full-off spinal strategy, allows us to put a larger proportion of the network together earlier and then connect generation into it as it comes online. That gives us more diversity of options on Black Star stations and allows us to use stations outside of a zone, a particular zone, be it the north of England, Scotland or southern England, in order to facilitate restoration right across the country. That's something that we've used to both mitigate or militate against the risk of closure of stations such as Longannet and closure of stations in England and Wales. It allows us to make sure that on the day of a Black Star, we can adjust our plans based on those stations that are available to make sure that we bring supplies back on, as you'd expect, as quickly as we can. That spinal strategy means that we don't any longer just focus on restarting particular regions on their own. It means that we grow the network earlier and then bring power stations on to it. It's a different technical process. I won't say that it's more complex, it is just different. It's something that we will build in stages with the distribution networks who are critical to this, because they reconnect the supply as we go. However, the very first one of those has been to merge the two historic plans in Scotland for the north and the south of Scotland into a single zone for the restart of Scotland. I'll ask you specifically about the UK in a minute, but I want to ask you a hypothetical question based on real-life situation. I've got an elderly constituent who lives in a remote, rural part of the country, and it depends on electric heating. How long would it take for them to be reconnected? How long does that compare with, say, the situation five years ago? The timescales are broadly consistent with, as they were five years ago, our aim very clearly is to maintain the consistency of those restoration times. You are always more likely to lose supplies due to a very local power cut related to the distribution network than you are related to a major national shutdown. If we had a major national shutdown, it is likely to be linked to a significant event, maybe a major weather storm such as in 1987 across the south of England, or indeed an act of terrorism or other malevolent act onto the electricity system as a whole. We look at resilience in total. We plan for a very robust and speedy restoration, which will give policymakers the choice as to how to direct power, certainly after the first 24 hours. We do know that for some areas of the country, not necessarily remote rural, particularly in Scotland, where the smaller hydro stations in the north and down in Dumfries and Galloway could provide early support into those rural networks. For some areas of the network, both urban and rural, it could be up to several days before everyone gets all of the power back that they need. That is why resilience planning is intimately involved in the role of local government to work on the resilience plans for each region, building up to national resilience plans involving the police and hospitals and everything else. We would expect for such a significant event to have robust plans in place that we practice regularly to ensure that, if the worst does happen and we can make sure that every constituent that we have is on as quickly as we can, we will understand that it takes time and that choices have to be made within that process. Going on to the GBA system as a whole, you mentioned the 1987 storm when there was loss of power in the south south of England. In the event of a complete GBA shutdown, given that you have those six zones or power islands or whatever you want to refer to them as, what is the priority in getting those up and running? The priority is to get the electrical network back and functioning as a strong system, given that it will have been significantly impeded by the complete shutdown. We expect the progression of the event to mean that, as I said, we get the vast bulk of the network back and energised in the first 24 hours. Key or in certain areas? That is uniformly across the UK. I am very clear that it is uniformly across the UK. I use the word broadly uniform, because within an hour or two it may be different. One of the reasons to do that is because resilience is managed at a regional level and at a national level for Scotland and for Wales. It is key that the power is available right across the country to provide support to critical local infrastructure. With the Government, we are looking very closely at that at the moment as part of making sure that as the electrical system goes through the very significant transformation that it is, we have the right plans in place in terms of speed of connection and resilience of network. We are working very closely with the network companies in Scotland and in England to make sure that the critical role that the network will play and the resilience needed from that network during the processes is there. All of those things have got to come together to work well. After the first 24 hours, it is dependent on the situation. It may be possible for policy makers to begin making choices around where that power goes. We would expect and our plans are for that power to continue to be fed uniformly around the country where it is needed. You mentioned the interconnectors. We could be dependent on the thermal plants in the north-east and north-west of England. If the thermal connectors from the UK to Europe would not be working in the event of a GB shutdown, would the interconnectors between Scotland and England be working? They would. They are an integral part of the GB networks. They would continue to operate and they can form a fundamental part of a black start. My final question is about the EU interconnectors, the ones that we have with France, Belgium and the Netherlands, etc. As the thermal capacity in the UK continues to drop, what impact would Brexit have on black start and the broader system security if the deal is not a hard Brexit or if we walk away without a deal? Without getting into hypotheticals, the UK is very much linked into the broader European market. We at National Grid have said that it is beneficial for the UK to continue to be an active participant in that broader European market predominantly because it delivers a lower price to consumers in Great Britain being part of that bigger market. However, we have the capacity mechanism arrangements covering GB that look at the level of security that we need. The vast bulk of capacity for GB is delivered within GB with only a small proportion being delivered by relatively small. Under most scenarios, even at short notice, you could replace that interconnection capacity with GB capacity. We are working very closely with Government on the evolution of the energy market as part of Brexit. We will continue to look at that as the next couple of years progresses. I was just going to add on the Brexit situation that we are currently going through a phase where, through EU network codes, we are looking to harmonise arrangements. Those are progressing to a point where we are almost at implementation. In fact, some of them are nearly there. Our preference would be to still be part of all that. However, whatever happens with the Brexit arrangements, we would expect that stakeholders would be consulted in order to see what stands and what falls by the by. However, our members are interested in making that work. If I could just add a point. I often consider that the interconnectors play a helpful role in the security of supply. Obviously, the precise way that we will be able to trade across those interconnectors remains to be seen depending on the ultimate arrangements that come out of Brexit. One thing that is worth noting is that the way that the capacity market works is that it derates interconnectors. It is taking into account how much it thinks it can rely on an interconnected being there when it is needed. Obviously, if needed, those derating factors could be adjusted in future capacity market rounds so that we could adjust the amount of capacity that is procured within the UK if we cannot rely on the interconnectors as much. I might just make just one very general comment to this strand of discussion. Things are changing and there are all these uncertainties. Brexit is one of them. The generation mix is changing. I think that the key thing is that the main parties are responsible for ensuring continuity and security of supply for the GB system and all the regions that they are in, Scotland, Wales and so on. It is continually kept under review that there is an active process of checking that the existing arrangements and procedures are appropriate. We can never say exactly what black starts, but we have not needed it in GB, but you can never say never. It is just the key thing that everything is kept under review and kept up to date. It is very encouraging that Bayes has established this working group that Duncan mentioned. From my own contact with various parties, I am encouraged that it is being taken seriously. I think that there is a step forward in the seriousness with which it is being taken right now. There is still a lot of work to be done, but it is going in the right direction. Of course, what we look for is that that is brought through in a timely fashion. I hope that any delays do not matter, because it is a very unlikely thing, but I know that Duncan has talked about there being an insurance policy that you want to have in place. In respect of everyday security of supply, which is the capacity market, and in respect of these very rare things, you just want to make sure that the facilities are there and kept up to date and continually under review. I want to move on to talk about Scotland's energy efficiency programme. Clearly, there are a growing number of local initiatives taking place, generating both energy and involved in energy efficiency. We have off-grid completely on the island of egg. Yesterday, we visited Levenmouth and saw the generation of fuel for transport and electricity on an off-grid, but parallel connected to the grid. We look to St Andrews, which is generating district heating and, hopefully, electricity in the future as well to make St Andrews a carbon neutral university. Are there regulatory and technical issues around local solutions to energy generation and energy efficiency that fit for purpose, or are there challenges there that we need to be aware of? As you rightly pointed out, that is a constantly moving target, so it is important that we make sure that regulatory arrangements remain fit for purpose. There are a number of planks to that, both on the generation side and embedded generation on the retail side. We are seeing increasingly local authorities and the possibility for Scottish Government as well to come involved and to be making retail offerings. Any generator, any retail supplier has to have a licence. There is a regulatory architecture in place to make sure that anybody participating in the market sticks to the rules, but it is important that the detail that sits beneath that is able to evolve as we move through time. Ofgem is working closely with Scottish Government and with UK Government and with stakeholders to make sure that we play our part in making sure that those arrangements are as fit for purpose as possible. Recently, we have responded to Scottish Government consultations on those issues as well. We have long promoted the adoption of a whole systems approach, so that should look at power, heat and transport together. It is very important to get this regulatory framework right. We have called for a holistic review of charging, because the regime that we have at the moment looked at a traditional model in which all the big generation kits are connected to the transmission system and demand at the lower network system. That is not the picture now. We need to make sure that the arrangements are not barriers to entry for more energy efficiency, demand side initiatives, et cetera, to get up and running. We need stability in policies, so a review of charging alongside a review of ancillary service provision hand in hand is very important. That should look at all the charging, balancing services, use of system costs and interconnected costs, because there is not a level playing field applied there compared to what some users have to pay. We really need to be careful of and make sure that we are embracing whatever we propose with regard to energy efficiency. We have to ensure that we educate consumers, because this is a huge impact on them. We have to explain to them what the impact will be on their bill for all of these initiatives. We have to carry them with us, but we also have to ensure that they are willing to play their part, because in the initial stages, if we were to green the heat system or go for more electrification, that would be a big overhead for them with regard to time and conversions and things like that. In the energy efficiency area, there are things that we could encourage those who are able to pay to participate in, which should help as well. However, if all those things reduce demand on the system, if we then go to electrification for transport, that will increase the overheads. That is where the education system comes in, explaining to people what the impact on their bills will be. Some of the energy strategy is quite ambitious, and there will be points along the transition, which will take us 10 to 20 to 30 years to decarbonise and increase energy efficiency. We have to make very important decisions about, for example, hydrogen in the gas network. How do we ensure that there is proper ownership of those decisions and related to that, given that this is a long timescale? Is there any benefit, perhaps, in some kind of independent body delivering the strategy or being accountable for the delivery of this strategy, given that Governments come and go and Parliaments come and go? Duncan Burk. I have a few points on that. First and foremost, clear strategy from Government and consistency of policy is really key. We welcome the work that you have put together as Scottish Government on the strategy. It is ambitious but far-sighted in scale and covers everything from electricity through to transport and heat. The benefits of such clear policy direction and consistency of direction is evidenced in the tremendous growth in renewables that Scotland has seen over the past 10 years. That is largely related, we think, to that clarity of policy at a national level. When we look at what is going to happen, it is very important that we test and pilot potential solutions alongside trying to design all this stuff up front. Barbara mentioned very eloquently a couple of times the role of very new entrants in this and disrupts us into the industry. Not all of the answers for this revolution, both in the decarbonisation of electricity, but also transport and heat. Not all of the answers are going to come from the existing large players with the capability and capacity to engage in an extensive Government review. We found that through a wide programme that we have on demand side management called Power Responsive, which has got everyone from Tesla to the distribution networks to small and large commercial entities such as retail in there, participating in helping to figure out what we should decide now and what we can leave to later. There is a very good report by McKinsey for the World Energy Forum earlier this year that highlighted the tremendous value of optionality within the way that energy markets and the decarbonisation of transport and heat will evolve over the next 10 or 20 years. I think that, consciously or not, that is recognised in the strategy as well, in the diversity of options around heat and in the need to move early in some areas. In terms of how that is done in Scotland, I would say that in Scotland you have two very active and engaged large energy companies in SSE and Scottish Power, both very actively engaged and bringing international expertise, particularly in the form of e-bedroiler with Scottish Power, into the distribution networks in Scotland, and a number of innovation projects up here being funded by Ofgem. Across Scotland you have a tremendous wealth of smaller innovative energy companies participating and helping to lead the debate from Flexitristy in Edinburgh to Smarter Grid Solutions and their partnerships with SSE and other companies in innovation projects. You have some tremendous organisations up here and we should make sure that we use them heavily alongside experts such as Professor Bill. My question is really large to be asked because I was going to be asking about how feasible you think the move from 15 per cent to 50 within the next 10 years is going to be, but I think that you've largely asked that, so I'm going to come on to something else really about the investment that people have made in, for example, wind turbines and how subsidy has been removed. Obviously, you've said some great things about how well we're doing in creating renewable energy in Scotland and a lot of that potentially could be to do with the regime that was there to allow people to invest in expensive wind turbines. What would your message be in terms of the removal of that subsidy and how do you think what the impact is going to be in the future in growing the amount of people that are making that investment in renewable technologies? I think that there's a real challenge just in general for the contracting of electricity generation. The shift to low-carbon energy means that you've got plants that have quite high capital costs but low running costs. The conventional way of running markets is really based on the short-run costs. In a fossil fuel-dominated market, it's to do with the cost, the relative prices of different fossil fuels, gas and coal, competing with each other. The way those markets would work would be whatever is the marginal unit, sets the price for the market and everybody recovers all their money and you get a bit of a surplus which pays off your long-run costs. If everybody's just got very small short-run costs and the market, the wholesale price is determined by that, it's very difficult to see how you can recover all of your long-run costs. I think that's partly recognised by the institution of the capacity market just to try and make sure that there's enough capacity there to fill in some of that gap. I think that we can see that it was also somewhat the case in respect of the contracts for difference that have been signed with low-carbon generation, which in the past has been on-shore wind, solar PV and offshore wind, also Hengley-C, and it's promised for the future in respect of offshore wind but not, as you've highlighted, on-shore wind. I'm not sure that that's really a consistent position in respect of the way to contract the cheapest forms of energy for the GB consumer or the Scottish consumer, or whoever. There's a fundamental issue to do with the long-run recovery of costs in a wholesale market that will be highly volatile in the times when it needs to be volatile to reflect those times of shortage and allow some plant that only runs a short period of time to recover its costs, but to give the confidence to investors over that period. I haven't thought this through enough, but I see some need for longer-term procurement of energy. I was talking just recently with a colleague from Chile who's with the system operator down there. Chile has actually been way ahead of the world in respect of electricity markets and the way that they've organised. They preceded us in terms of liberalisation. They've done it in the 1980s and we did it in 1990. There's a lot of value in looking at what they're doing. My understanding is that they are going to more of a slightly longer-term, more centralised procurement, albeit competitively, of a range of types of generation, trying to make it as technology neutral as possible. That, in principle, if we see the cost of on-shore wind, the levelised cost of on-shore wind coming down to near the levels of a new CTGT plant would appear to give an opportunity for on-shore wind, which I think still remains for our part of the world the cheapest form of low-carbon energy anyway. I think that there is a lot to be thought about there, which could lead to a fairly wide-ranging change to the way that any type of energy is procured. I guess I come back to consistency. I mean, our members are fully supportive of EMR, the capacity mechanism, the contracts for difference, and on-shore wind has been proven as one of the cheapest form of renewables. Let's see on-shore wind built where it's most efficient and effective and where local communities support the building of it. The other thing to look at, as well as the repowering and more efficient use of existing sites, which is the next phase that we are looking towards. If the planning regime is right and the will is there, we can get those projects up and built and running. Do you accept that removal of the subsidy is a barrier towards on-shore wind becoming viable as a main source of energy? There are many challenges there. The removal of the subsidy hasn't helped, but we need to look at more efficient ways to deliver. The problem is that, at the moment, the policy is uncertain and the sooner we get some certainty, the better, all around for many areas, not just energy. The energy strategy contains the proposal for a Government-owned energy company. At the moment, we are not exactly clear what form that is going to take. I am just wondering what the panel's views on that. Do we think that it has the potential to address market failures and that it could invest in infrastructure, for instance, or do we think that it would act more as an energy supplier or should it be doing both of those types of things? It is a very interesting concept. In some ways, it is not an entirely new concept, as I alluded to before. We have seen some public sector organisations, local authorities in Scotland and England and Wales, who already look to gain electricity supply licences. It is something that Ofgem is more than happy to work with the Scottish Government to explore. We have recently set up something within Ofgem called the Innovation Hub, which is designed for any industry player or potential industry player to be able to come along and ask questions and talk about perhaps a new concept, a new way of wanting to engage in the market and look at what are the regulatory barriers, what are the current rules and what perhaps need to change to be able to facilitate those new innovations. We are very supportive of having further discussions on that. I was just going to say that this is a tremendous opportunity, but it could also be not so good an idea if it is not fully explored and the risks are properly assessed. I have recently been approached by one of the local authorities to say, should we get into this, Barbara? My advice would be that you have got to research it. There are some very good operatives out there at the moment who are doing this already. Get out there and speak to them. Find out what their experiences are so that they can fully assess the risks and the rewards. Speak to the regulator. Find out what the process is that you need to go to. Once you have done all of that, sit back and double-check what the others have done, because that is not going to be a speedy process, but it means that you have had time to fully assess what the opportunities are. Others have done it. Some look like they are making a success of it, so it is a tremendous opportunity. However, there are also partnerships that you can do with the existing companies and, after all, they know the system best. Get out there and explore it. Barbara's advice is very sound on that. There are risks. As you said, we are not totally clear what the Scottish Government has quite in mind on this. One of the things may well be that even just as a user of a large amount of energy itself and could strike a long-term contract which then helps to underpin investment in new renewables capacity, so that could be a good thing. However, there is a need to know what you are doing in the marketplace in a nutshell. That is what you are saying, Barbara. There are people who have got expertise with whom the Scottish Government, in whatever guise it wants to take this forward, could partner with and gain knowledge from. Part of that is the idea of issuing the Scottish Renewable Energy Bond as a way of financing support for Scotland's renewable sector, which comes on to Gillian Martin's question, with subsidies being removed. Is that a way forward to financing renewables in Scotland now? That is a great idea. There are commercially available bonds that do a similar kind of thing. It can play to individual citizens, individual investors, concerns about the environment and sustainability and so on, and why not? That comes to the end of our session today, this session that is. Thank you very much to all of our guests for coming in today, and I will suspend this session so that we can move into the private session and allow the gallery to clear. Thanks again to all of our guests for coming in today.