Climate Change Plan: third report on proposals and policies - written statement

Electricity

Economy, Jobs and Fair Work Committee

1. The Committee recommended that, given the reliance within the Plan on the development and large-scale demonstration of Carbon Capture and Storage (CCS), consideration is given to other available options, alongside CCS. (65)

• In response to the feedback on the draft Plan and Energy Strategy, we have revised our assumptions about the application of CCS. The feedback we received highlighted the challenge of deploying CCS at scale in the period set out in the draft. In response to this, we have applied a constraint in the model, limiting the uptake of CCS before 2030. Given the feedback on the interaction with bioenergy, we have also limited the ability to account for negative emissions in the modelling, through bioenergy generation with CCS. Scottish Government policies support the development of CCS, which will be important for the long term cost-effective decarbonisation of our economy in key sectors such as heat, industry and electricity.

2. The Committee sought additional information from the Scottish Government regarding the intergovernmental collaboration required with the UK Government for the development of CCS and how the Scottish Government plans to take this forward. The Committee noted that it is vital to establish how the development of CCS will be supported and funded. (66)

• The UK Government has proposed a new policy approach to Carbon Capture Utilisation and Storage (CCUS) as part of its wider Clean Growth Strategy launched on 12 October 2017. To advance CCUS the UK Government has set up a Ministerial-led CCUS Council and established a CCUS Cost Reduction Taskforce. Scottish Government officials are participating in both of these forums. The UK Government has also committed £20m funding towards a CCUS demonstration programme.
• In addition to this, the Scottish Government is supporting the Acorn CCS Project, which has secured €1.9m under an EU science funding stream to Accelerate CCS Technologies (ACT). We are contributing £100k funding towards this project's feasibility study on a small scale CCS demonstrator project targeting industrial gas processing CO₂ emissions at St. Fergus.
• The Scottish Government has also provided £250k funding to Scottish Carbon Capture Storage (SCCS) to take forward a programme of work to assess further opportunities to support the delivery of CCS infrastructure and demonstration facilities for CCS and CO₂ Utilisation on the ground in Scotland.

3. The Committee noted that the demonstration and commercialisation of CCS must be encouraged not only in Scotland but also within the UK, with a UK government system aligned with Scottish energy priorities. (67)

• CCS infrastructure deployed across UK regions and industrial sectors has the potential to contribute greatly to achieving deep decarbonisation.
• The UK Government's new policy approach on CCUS has made commitments to work with Teesside, Merseyside, South Wales and Grangemouth to test potential for development of industrial CCUS decarbonisation clusters. Scottish Government officials are collaborating with UK counterparts to ensure Scottish clustering opportunities are explored and discussed as part of the UK Government Ministerial -led CCUS Council.

4. The Committee noted that it believes that CCS has a role to play and can be applied in diverse ways including industrial applications. The Committee highlighted that it believes that there is merit in exploring options for the future use of the existing asset at Peterhead and that CCS represents an opportunity to do so. (68)

• CCS and CCU are currently the principal technologies capable of industrial-scale climate mitigation in some of the most carbon-intensive industrial processes such as cement production, oil and gas processing, and the production of steel and other metals. In collaboration with Scottish Enterprise and SCCS, the Scottish Government has explored the role of CCS in decarbonisation industry and potential hub models to role of carbon capture, transport and storage.^{[12] [13]} CCS would also be necessary to mitigate CO₂ emission from steam methane reforming, if deployed as part of a future heat decarbonisation plan.
• The Scottish Government is supporting the Acorn CCS Project at St Fergus, which has secured €1.9M under an EU science funding stream to Accelerate CCS Technologies (ACT). We are contributing £100k funding towards this project's feasibility study on a small scale CCS demonstrator project targeting industrial gas -processing CO₂ emissions at St. Fergus which will draw upon important elements of the publicly funded FEED study work carried out for the previous Peterhead Project.
• The role of the planning system including CCS is included in the revised The Planning System section of the Plan.

5. The Committee recommended that the Scottish Government works with the UK Government to consider what investment can be made in Peterhead to secure its long-term future. (69)

• Investment in Peterhead power station is a commercial matter for station owners SSE. This is being considered as part of its ongoing review of the power station.
• The Scottish Government is clear that it views Peterhead as a significant strategic asset for Scottish energy resilience. In July 2017, the First Minister made a successful representation to Ofgem regarding changes to the transmission charging regime. These changes, which will be implemented by April 2018, will have a material impact on the operation of the power station. The cost difference is a key factor in SSE's ongoing review. We will continue to engage and work collaboratively with the UK Government, National Grid and Ofgem on Great Britain-wide resilience issues.

6. The Committee questioned whether there is a need for additional thermal capacity for the purposes of mitigating climate change and noted that evidence from the National Grid, who say it is not required. The Committee asked the Scottish Government to provide it with details of the modelling carried out to work out what installed capacity is needed. (76)

• A strategic objective of our Energy Strategy and Plan is for a secure and flexible energy supply, with a system robust against fluctuations and interruptions to supply. Investment in new, efficient gas-fired generation can play a key role in delivering this.
• The National Grid's view that new gas-fired capacity in Scotland is not necessary to meet peak demand is correct. Scotland's grid regularly operates with a high penetration of low carbon power, with this supported by transmission infrastructure.
• However, our preference for new, flexible and efficient gas-fired generation to be spread throughout GB and in Scotland reflects our consideration of Scotland's power system in the round - the need for sufficient megawatts of power, for quality of power supplied and, crucially, for system operability, resilience and restoration. This aligns with evidence presented to the EJFW Committee on 13 June 2017 by Duncan Burt of National Grid's System Operation. Mr Burt commented that, ideally, remaining thermal plants should be spread across GB to help manage the grid.
• Current regulatory and market mechanisms attempt to be cost-reflective but, while capturing some of the costs created by synchronous generation in Scotland, fail to reflect the benefits they create, not least through their role in restoring demand after an interruption to supply. The result is that as thermal power stations such as Longannet and Cockenzie have closed, transmission charges and shortcomings within the Capacity Market continue to act as a barrier to investment in replacement gas capacity in Scotland. We firmly believe this needs to be addressed.

7. The Committee noted that many of the support mechanisms for renewable energy are under the control of the UK Government and acknowledged that this is the case for other technologies which are vital for the Plan. The Committee encouraged the Scottish Government to do what it can within its own remit to achieve its policy outcomes, whilst working with the UK Government to maximise support available to the renewable energy industry in Scotland. (44)

• The recently published Scottish Energy Strategy reiterates the Scottish Government's determination to take actions of our own to support renewable generation and growth across Scotland, while working with the UK Government to pursue the necessary policy changes and delivery in those areas which are reserved. The Energy Strategy lists a number of actions, ranging from continued funding for renewables innovation, targeted relief through non-domestic rates for specific renewables projects, and a sustained focus on securing renewables supply chain benefits.

8. The Committee noted the aim in the Plan to demonstrate technologies such as hydrogen and CCS at commercial scale by 2030. The Committee recommended that the final Plan should contain more detail on how the policy outcomes for industry will be achieved and implemented. (173)

• We are monitoring the progress of Scottish Gas Network's current feasibility study funded by OFGEM which in its next phase looks to demonstrate a 100% hydrogen gas network system for heat pilot in Scotland. If successful this may in turn open up opportunities for fuel-switching options to zero-emissions hydrogen in industrial processes.
• Our funding contribution to the Acorn CCS Project in St. Fergus, committed in the Programme for Government 2017- 2018, will contribute to the ambition in the Plan to see CCS demonstrated at a commercial scale by 2030. The Acorn feasibility study aims to demonstrate a lowest cost full-chain CCS project that targets industrial emissions. Subsequent project phases would aim to establish the UK's first full chain CCS demonstrator.
• The UK Government's new policy approach to CCUS sets out an ambition to deploy CCUS at scale in the 2030s and has committed the UK Government to publish its CCUS "deployment pathway" in 2018. The UK Government have set up a Ministerial-led CCUS Council and established a CCUS Cost Reduction Taskforce. To take these plans forward Scottish Government officials are participating in both of these forums.
• As outlined in the Scottish Government's Energy Strategy, it is the our intention to publish a gas network vision paper, which will provide an opportunity to explore issues such as the role of hydrogen in more depth, and inform future investment cycles by network operators.

Environment, Climate Change and Land Reform Committee

1. The Committee noted its support for the objectives relating to the successful implementation of carbon capture and storage, however it highlighted that there are significant assumptions in achieving this, and it is unclear what will happen if this is not achieved. (265)

• There is widespread international recognition that CCS will be essential to cost-effective climate policies. Within this international context, there are currently 12 CCS projects, with countries across the world investigating options for establishing future CCS industries. For instance, Norway has been operating a CCS plant since 1996, and has plans to further develop their storage resources to support international decarbonisation efforts. Scottish Government policy, which targets both CCS and CCU, aims to ensure that future commercial CCS opportunities harness Scotland's carbon storage assets.

2. The Committee noted that it does not have the evidence required to enable it to concur with the view of the Scottish Government regarding the credibility of CCS in the draft Plan. It recommended that it would be helpful for the final Plan to include further evidence and data (where available) on why the Plan is so reliant on CCS. (274)

• In response to the feedback on the draft Plan and Energy Strategy, we have revised our assumptions about the application of CCS. The feedback we received highlighted the challenge of deploying CCS at scale in the period set out in the draft. In response to this, we have applied a constraint in the model, limiting the uptake of CCS before 2030. Given the feedback on the interaction with bioenergy, we have also limited the ability to account for negative emissions in the modelling, through bioenergy generation with CCS.

3. The Committee recommended that the final draft of the Plan includes an alternative (Plan B) option for those policies where the EU and the UK policy making will carry significant weight. Given the concerns raised particularly about the bioenergy and CCS assumptions the Committee recommends that a Plan B option that does not rely on this technology in the timescale anticipated is developed. It further recommended that this Plan B option should set out what can be done within domestic efforts to achieve the policy outcomes. (288)

• In response to the feedback on the draft Plan and Energy Strategy, we have revised our assumptions about the application of CCS. The feedback we received highlighted the challenge of deploying CCS at scale in the period set out in the draft. We therefore applied a constraint in the model, limiting the uptake of CCS before 2030. In addition, given the feedback on the interaction with bioenergy, we also limited the ability to account for negative emissions in the modelling, through bioenergy generation with CCS.
• Scottish Government policies, however, support the development of CCS, which will be important for the long term cost-effective decarbonisation of our economy in key sectors such as heat, industry and electricity. CCS is not required for the delivery of the electricity generation carbon envelope out to 2032. It does, however, represent the only viable technology capable of mitigating industrial scale CO₂ emissions in some of the world's most carbon intensive industrial processes.

4. The Committee recommended that the final Plan state explicitly how the results of the draft Energy Strategy consultation contributed to the final Plan. (108)

• The Plan has benefitted from the in depth consideration of energy issues during the considerable public and stakeholder engagement and feedback gathered during the consultation on the draft Energy Strategy. The analysis of the consultation of responses to the draft Energy Strategy was carried out by an independent social research company and the report was published on 14 November 2017. This includes responses to the separate consultations on Scotland's Energy Efficiency Programme, and the draft Onshore Wind Policy Statement. The results of this analysis were considered carefully during the development of the Plan.

5. The Committee recommended that the final Plan should explicitly state the source of gas incorporated into energy sector assumptions to provide clarity and confidence for the Committee and stakeholders that unconventional gas will not form part of the delivery of the final Plan. (536)

• On 3 October 2017 the Scottish Government set out its preferred position on unconventional oil and gas, this was to not support the development of this industry in Scotland. On 24 October, the Scottish Parliament voted to support the Scottish Government's position. In line with statutory responsibilities, a Strategic Environmental Assessment is being prepared for consideration before the position on unconventional oil and gas is finalised.