Scottish Energy Advisory Board minutes: October 2021

Attendees and apologies

Members in attendance

• Rt. Hon. Nicola Sturgeon MSP, First Minister (co-chair)
• Professor Sir Jim McDonald, Principle Professor and Vice Chancellor, University of Strathclyde (co-chair)
• Michael Matheson MSP, Cabinet Secretary for Net Zero, Energy and Transport

• Brian McFarlane, Co-chair/Head of Projects, Scottish Offshore Wind Energy Council/SSE
• Claire Mack, Co-chair/Chief Executive, Renewables SLG/Scottish Renewables
• Professor Keith Bell, Co-chair/Committee member, Energy Networks SLG/CCC
• Melfort Campbell, Co-chair/CEO, Oil & Gas & Energy Transition SLG/IMES Group
• Lewis Shand-Smith, Chair, Energy Consumers Commission
• Jane Morrison-Ross, Chief Executive, South of Scotland Enterprise
• Adrian Gillespie, Chief Executive, Scottish Enterprise
• Rozanne Foyer, General Secretary, STUC
• Deirdre Michie, CEO, Oil & Gas UK
• Andrew Jamieson, Chief Executive, ORE Catapult
• Keith MacLean, Founder and Director, Providence Policy
• Ian Marchant, CEO, Dunelm Energy
• Dave Pearson, Director, Star Renewables
• Keith Anderson, Chief Executive, Scottish Power
• Fintan Slye, Director, National Grid ESO
• Ronnie Quinn, CEO, NECUSS
• Matt Sykes, Managing Director, Generation, EDF
• Jonathan Brearley, Chief Executive, Ofgem
• Chris Brodie, Director of Skills Planning and Sector Development, SDS

Apologies

• Carroll Buxton, Interim Chief Executive, Highlands and Highlands Enterprise;
• Frank Mitchell, Chair, Skills Development Scotland;
• Colette Cohen, CEO, Net-Zero Technology Centre;
• Charles Hammond, CEO of Forth Ports;
• John Morea, CEO of SGN;
• Jim McColl, CEO and Founder, Clyde Blowers;
• Alistair Phillips-Davis, CEO, SSE.

Scottish Government

• Kersti Berge, Director of Energy and Climate Change
• William Black, Deputy Director for Onshore Electricity Policy, Strategic Co-ordination and Consents
• Madeleine Plater, Secretariat
• Lewis Todd, Secretariat
• Michael Reilly, Secretariat

Items and actions

Welcome and introduction

Minutes from 18 March 2021 meeting of SEAB approved with minor amendments.

Opening remarks from the First Minister.

Action: SEAB secretariat to update 18 March 2021 SEAB minutes with changes and publish on the Scottish Government website.

Energy pricing 

Jonathan Brearley, CEO of Ofgem, provided an update on energy prices:

• dramatic change in the wholesale gas market; It is unclear whether prices coming down soon due to restrictions on supply and a surge in demand. There will be upward pressure on consumers’ bills but it is too early to calculate what it will be
• twelve companies have exited the energy market so far with many other companies struggling to endure the pace and change of the wholesale price
• there needs to be thinking within government and industry how the retail market can begin to bring prices down in the short-term. In the medium and long-term, what regulatory arrangements need to be brought in to prevent future issues whilst ensuring any changes are in line with net-zero?

First Minister: What more can Ofgem do to try and help mitigate the impact on consumers? What are the expectations on moving into alternative options for the Supplier of Last Resort, and does Ofgem have concerns about some of the big players in the market? Was Ofgem comfortable about security of supply over winter?

• Jonathan Brearley: Ofgem are working closely with the industry to make sure that they stick to all the rules and to make sure customers continue to receive necessary benefits. With the scale of change for consumers Ofgem is limited in various aspects, at which point there is a role for ministers to play
• for smaller companies SoLR is working, but all scenarios need to be prepared for
• on security of supply, there are always factors which increase risk, however Ofgem is confident for the winter that the systems are robust enough to cope

Keith Anderson: The industry is making huge losses, and the biggest differentials are those that are hedged versus those that are not; the price cap is putting massive financial strain on the sector. Customers that have gone through SoLR are being protected, but the associated costs are being spread across other customers

• JB: Priority is to protect consumers; looking ahead there is a collective need to look at opportunities to design a different kind of retail market

Ian Marchant: The impact on business customers must be remembered. Who has exited the market and have Ofgem considered raising the price cap earlier as raising in April 2022 may cause prices to jump considerably.

• JB: Some companies that have since exited were not having issues between April-July 2021. Regarding the price cap, Ofgem are looking at various options; it is expected to stay in place as it is but it is a decision for GEMA

Rozanne Foyer: A redesign of the market will not fix current issues; bolder options, including nationalisation should be part of this debate.

• JB: Nationalisation is an issue for the UK Government

Deirdre Michie: Regarding a move to emergency gas specifications there have been many shut downs because of maintenance backlog due to Covid, which is now recovering. Need to look at diversity of supply and flagging to other sectors who can help to mitigate any future issues.

• JB: Diversity of supply is strategic way out of situation like this but will take time and was keen to work with Deirdre on mitigation

Keith MacLean: Regarding shifting existing levies from electricity onto gas, should there be a shift to taxation for funding this? What are the protective measures for those in fuel poverty if done through levies?

• JB: It is for HM Treasury rather than Ofgem to decide on levies. The focus at the moment needs to be on the fuel poor customers

Claire Mack: Decarbonisation of heat will diversify supply. The interaction between Contracts for Difference (CfD) and the Transmission Network Use of System Charges (TNUoS) needs looked at, as does the wider scale of costs into the system.

• JB: There is a sense of incremental charge changes on CfD and TNUoS, but more significant changes in the market may be required

Lewis Shand-Smith: Need to do all we can to protect people in the short term and give them the confidence to engage so that we can meet the net zero targets.

• JB: There is a need think about role of the retailer in the medium to long term

Discussion

First Minister: This is an immediate and substantial challenge that we need to work together to tackle. Some of the issues are systemic so need to be considered longer term.

Keith Anderson: There were significant issues before with the strength and liquidity of companies, as the market encouraged many small and financially instable suppliers. None of the 12 companies that exited were hedged, and the rules about who needs to enter the market need changed. The price cap currently benefits the wealthy, not the fuel poor.

Deidre Michie: There is a need to sustain domestic sources of energy which can add diversity to energy system going forward; 80% of homes are still heated by gas.

Ian Marchant: Need to look at robustness of wholesale market; if we cannot accept volatility, then we have to work to new system where the state smooths it out.

Action: Adrian Gillespie and Ian Marchant to discuss continued monitoring of the energy price spike on businesses.

Action: Secretariat to ensure energy pricing remains on the SEAB agenda to allow for a more consolidated SEAB response to the situation.

COP26

The Cabinet Secretary for Net Zero Energy and Transport provided an overview of the Scottish Government’s ambitions for COP26:

• the Scottish Government’s programme will take place across seven locations, with a programme of events scheduled for The Lighthouse in Glasgow with around 80-90 events over the two weeks
• one of the eight key workstreams for the Scottish Government is Energy, which contains three pillars: green buildings, hydrogen and wind

Discussion

Deirdre Michie: The Scottish Government should highlight the positive role hydrogen and CCUS, and how the oil and gas sectors can aid in the transition.

Andrew Jamieson: ORE Catapult will be working with SG to look at options for floating wind following on from the SIA. We will need a collaborative framework which includes developers and supply chain ends who are used to competing with one another.

Ronnie Quinn: Welcomed the attention on Hydrogen and CCUS, particularly since the clusters do not have a place in the Green Zone.

Rozanne Foyer: STUC priorities are around green jobs and new forms of energy supply. Urged the Scottish Government to do something about potential transport industrial action during COP26.

Cabinet Secretary: Green retrofit fits in very strongly with the Heat In Buildings Strategy which is about reducing demand as well as new systems. Also aware of the industrial action planned.

Claire Mack: Need to focus on global legacy and think from local point of view. Onshore wind and other renewable technologies will drive green jobs. We need to demonstrate our world leading status in decarbonising electricity, as well as wave and tidal.

Brian McFarlane: Urgency must be flagged, particularly regarding offshore wind. There is a global race to maximise opportunities, and we need to recognise importance of enterprise investment.

Cabinet Secretary: We need to focus on the role that people and communities play. The Offshore Wind Policy Statement provides a good platform. Some aspects of policy are reserved, but the UK Government have targeted a decarbonised energy system by 2035.

SDS update on the climate emergency skills action plan

Chris Brodie, Director of Regional Planning and Sector Development at SDS provided an update on the Climate Emergency Skills Action Plan (CESAP):

• this cross sectoral plan has been timed to align with the CCPu and focusses on immediate issues and long-term planning
• focussing on five broad areas, CESAP links with the Energy Task Force’s Joint Business Plan for Economic Recovery in the energy sector

Claire Mack: CESAP is to become a standing item at the Renewable Energy Strategic Leadership Group (RESLG).

Dave Pearson: There is a need to think about local opportunities now that Queens Quay has been fully commissioned; f they joined tomorrow they would be 98% carbon neutral.

John Morea: We have to make sure we don't close down options for hydrogen. For F100 project there will be training colleges.

Action: Dave Pearson to share details on College and Golden Jubilee issue with the Cabinet Secretary.

Action: Chris Brodie to provide an update on critical junctures.

AOB​​​​​​​

No items were raised under AOB, and the chair closed the meeting.

Summary of actions

Owner: Secretariat

Action: update March 2021 minutes and publish on website.

Due: November 2021

Owner: Adrian Gillespie/Ian Marchant

Action: discuss continued monitoring of energy price spike on businesses.

Due: Next SEAB

Owner: Secretariat

Action: ensure energy pricing remains on the SEAB agenda.

Due: next SEAB

Owner: Dave Pearson

Action: share details on College and Golden Jubilee issue with the Cabinet Secretary.

Due: November 2021

Owner: Chris Brodie

Action: Provide an update on critical junctures.

Due: TBA