Members present: Pete Wishart (Chair); Mr David Anderson; Kirsty Blackman; Mr Christopher Chope; Margaret Ferrier; Chris Law and Maggie Throup.

 

Witnesses: Lord Dunlop, Parliamentary Under-Secretary of State for Scotland, Scotland Office, Andrea Leadsom MP, Minister of State, Department of Energy and Climate Change, and Tom Luff, Head of the Renewables Programme team, Clean Electricity Directorate, Department of Energy and Climate Change, gave evidence.

Q437 Chair: We will start with the usual introductions, who you are all, who you represent, and anything by way of a very short introductory statement. We will start with you, Minister.

Andrea Leadsom: Thank you. I am Andrea Leadsom, Minister of State for Energy and Climate Change. I am very grateful for the opportunity to come and give evidence before the Committee today, so thank you, Chairman.

I would like to begin by saying that I am very proud of the renewables success story in the UK. We have a proven track record of growth. 2015 was another record year with £13 billion invested in renewable electricity and renewables providing nearly a quarter of the UK’s electricity generation, outperforming coal for the first time. Scotland has been a very important part of that success story. An ONS survey published last month estimates that in 2014 low carbon and renewable energy activities generated £5.6 billion of turnover and employed around 21,500 full-time equivalent employees in Scotland. About 30% of the UK’s renewable electricity generation capacity is in Scotland.

As the Committee will know, we identified a significant projected overspend on renewable support schemes last year that meant we needed to take decisive action to control costs and protect consumer bills. With the recent passage of the Energy Act and the closure of the renewables obligation to new onshore wind, we have now completed implementation of those cost control measures and placed our energy policy on a more sustainable footing. However, even with the cost control measures we have taken, we are still on track to deliver 35% of the UK’s electricity from renewables in 2020, exceeding our ambition of 30%.

That is just by way of introduction to set the scene. Thank you very much.

Lord Dunlop: Thank you, Mr Chairman, for inviting us here today. I know this is an important inquiry for the renewable energy sector in Scotland. Scotland has played a very important part in the renewables story of the UK and will continue to play a very major part as we look to the future. I am very welcoming of this inquiry and the opportunity to address your questions.

I also want to note that we have had the recent passage of what is now the Scotland Act and we have delivered the Smith commission in full, meeting our commitment to strengthen the Scottish Parliament. This includes important energy-related powers, including the power to design and implement schemes relating to energy efficiency and fuel poverty and, I think particularly relevant to today’s discussion, giving Scottish Ministers a formal consultative role in the design and redesign of renewable support schemes. Reflecting what Paul Wheelhouse said to you last week, we very much look forward to resetting the relationship after the Holyrood election and driving forward to implement this new devolution settlement.

Q438 Chair: Mr Luff, do you have anything to add? I didn’t know if you were decorative or whether you were a participant.

Tom Luff: My name is Tom Luff. I am the Head of the Renewables Programme team in the Clean Electricity Directorate in DECC.

Q439 Chair: Obviously not decorative. That is a very fulfilling task. I am quite surprised that none of you thought to mention the fact that today there was quite a big announcement in Scotland that we have now met our target six years early. Not only have we met the 42% target that was set back in 1990 but we have more than exceeded it at 45.8%. We find it a little bit odd for a Scotland Office Minister to be with us and not mention that.

Lord Dunlop: I am sure you are going to give me plenty of opportunities and I am grateful to you for drawing attention to it.

Q440 Chair: Given what you have announced about your early decision to withdraw support for renewable obligations for wind and solar, how will these announcements that have been currently made, which is part of the Energy Act, help Scotland ensure that we meet even more ambitious targets in the future?

Andrea Leadsom: What is very clear is that our intention in closing the RO early and in the measures in the Energy Act and also in the feed-in tariff scheme was to get the balance right between the costs to bill consumers and the amazing deployment. You are exactly right, Mr Chairman, I am sorry there was not a stop press notice but enormous congratulations are due. I am sure you will agree that with 8% of the population of the United Kingdom and 24% of the renewable obligation spend on Scotland, there has been an enormous investment in Scotland. The whole of the United Kingdom takes pleasure in and has in fact contributed through their bills to the success of Scotland in meeting its renewable energy target six years early. Huge congratulations but you will appreciate, Mr Chairman, that we also, as consumer champions in Government, need to look after the costs to consumers.

Q441 Chair: We want to come on to some of the geographical costs as much as we can identify them according to what is available from your Department, but just on this—I don’t know if Lord Dunlop could help us with this—we have heard the commitment towards consumers; how do the recent announcements from this Government assist Scotland in ensuring that we do even more?

Lord Dunlop: The key thing I would say about how do we help consumers is that investing in new capacity is extremely expensive. It is the broad shoulders of the UK, spreading those costs across the UK, that really helps consumers in Scotland. I am sure we will come on to talk about transmission costs, but 80% of those transmission costs feed through into consumer bills. I think it is very helpful indeed to Scottish consumers to have those costs spread across the whole of the UK and not falling completely on Scottish consumers.

Q442 Chair: What I have not heard in any of these replies—which I am very obviously grateful for—is how the recent announcements will help and assist.

Andrea Leadsom: Let me have another go at that. In previous allocation rounds, Scottish projects won 11 from the 25 contracts for difference that have been issued. You will be aware, Mr Chairman, that we have announced an ongoing commitment to offshore wind of a further £730 million of investment. The first CfD auction will be in Q4 this year and we anticipate there will be Scottish projects that bid into that, as well as around the United Kingdom. For the renewable heat incentive, Scotland is the second largest beneficiary with approximately 20% of the capacity of accredited installations up to the end of April 2016. The Government have recently increased the budget for the RHI to reach £1.15 billion by March 2021 from its current £430 million budget level.

It is expected that the investment decisions being taken on future deployment of those technologies that have not yet reached a point where they can stand on their own feet without subsidy will benefit Scotland and we look forward to that being the case.

Q443 Chair: We are grateful for all that but it was not actually the answer to the question about how the recent announcements will help Scotland.

Andrea Leadsom: I think the CfD announcement and the RHI—how recent do you mean? I think I have just answered your question.

Q444 Chair: We are talking about the withdrawal of support for renewable obligations for onshore wind and for solar. Let me tell you what others say about. For example, Scottish Renewables say, “It is estimated the impact of cutting renewables obligation for onshore wind will cost Scotland up to £3 billion of lost investment and put at risk 5,400 jobs”. That is their view about what will happen as a consequence of what was recently announced for renewable obligations. The Climate Change Committee says there is an impact on investor confidence, and it was reflected in the UK dropping out of the top 10 attractive countries to invest in renewables according to the EY Renewable Energy Country Attractiveness Index. You have obviously seen this, Minister, which is the report by the Select Committee and its conclusions are quite dramatic, “It is clear that the confidence of many investors has been dented by the Government’s actions since the election”. Do you recognise these comments? Do you accept their accuracy? If they are wrong, where have they got it wrong?

Andrea Leadsom: I think that the UK has been a superb place for investment and continues to be so. As I said in my introductory remarks, last year was another record year for investment in UK renewables. Of course, the point is that there is a balance. We have seen far in excess of our expectations for renewables deployment right across the board and what that meant was that the cost to consumers was far beyond what we had expected and budgeted for them to be by 2020. What we have had to do is to rebalance the equation to make sure that we are taking into account the cost to consumers, which obviously includes Scottish consumers, as well as the needs of industry. But I say again, as you have just pointed out, Scotland has met its carbon emission reductions six years early. In the UK we are on target to meet our renewables targets, exceed our renewables targets of 30% by 2020, and in fact we will be achieving 35%. It is right that when we set out our plans that if we massively exceed them in the early days, we should then take very careful account of the consequences for the bills of those hardworking families and businesses who are having to pay for it.

Q445 Chair: We want to come on to consider Scotland’s contribution to the UK targets and how we are assisting, hopefully, the UK and your Department to meet some of these targets, but can I just say that we have 70% of the onshore wind capacity in Scotland. There will be a disproportionate impact from the withdrawal of support to Scotland. First, do you recognise that and, secondly, what is your Department going to do in order to help us address some of these shortcomings?

Andrea Leadsom: I think it was a very clear manifesto commitment that was set out long before the 2015 general election that this Conservative Party was determined to, first, give local communities a final say on the siting of windfarms—

Chair: Not Scotland?

Andrea Leadsom: —but, secondly, to stop the ongoing cost on consumer bills and that there would not be any further subsidies for onshore wind. That was a very clear manifesto commitment.

Q446 Chair: What is the issue with this Conservative Government and onshore wind? Is it an ideological hostility to it or do you just not like them very much? They are obviously significantly, substantially assisting us in meeting targets. What is the problem with them?

Andrea Leadsom: As I say, we have very clear plans for meeting our renewable electricity targets of 30% by 2020. We massively exceeded those and it is a simple issue of the cost to consumers versus meeting our targets. Once you have met your targets and exceeded them you, of course, need to consider fairness to bill payers. It was a very clear manifesto commitment and we are determined to be fair to bill payers.

Q447 Chair: Just before I bring you in, Lord Dunlop, this is important to us because we are trying to understand the reasons why this Government have a particular issue with onshore wind. We invited some of the anti-windfarm groups to come in to try to understand some of their issues and while there were a number of things that they brought forward that I think were quite legitimate about the impact on house prices and on the visual environment, they also started to question the very science and started to raise issues with whether there was even such a thing as climate change. I am presuming that is not the Government’s position when it comes to onshore wind but I am still struggling to understand what it is you have against onshore windfarms.

Andrea Leadsom: I think I have explained several times now and you are very well aware that the Government’s position is that we are committed to meeting our climate change targets, keeping the costs down for consumers and keeping the lights on. To express it another way, in our electricity market reform delivery plan, we budgeted for between 11 and 13 gigawatts of onshore wind by 2020. We now expect to be at about 12.3 gigawatts by 2020, so we are absolutely within our plans and that is taking into account the cost control that we put in place. There is nothing odd about this. It is that when you set out a plan and you have exceeded it and that has cost implications for families and businesses, you need to then focus on keeping the costs down for families and businesses.

Q448 Chair: I am still not hearing much about onshore wind, but we will leave it at that just now.

Lord Dunlop: To add to what Andrea has said, when resources are finite you want to focus those resources where they are needed most. From the engagement I have had with people in the industry, they do recognise that the costs of onshore wind have come down and what the Government are doing is using the finite resources going forward into other areas like offshore wind, which I am sure we will come on to talk about.

Andrea Leadsom: I am sure you are aware, Chairman, that there are some projects that have come forward since the RO closed, so there is a small amount of evidence that some projects, if they are well-sited, can come forward without subsidy. Lord Dunlop is exactly right to highlight the fact that since there is a limited amount of money we can expect to put on to consumer bills, we should focus it, as we are doing, on those technologies such as offshore wind where the scope for the downward trajectory of costs is very steep if we can invest in it and support it, and that is what we are prioritising.

Q449 Chair: Are we not heading towards subsidy-free wind production from onshore wind and if we kept on supporting the sector are we not into a situation where not only does it compete with all other energy sources, it is actually going to be ahead of them in unit per megawatt?

Andrea Leadsom: Is that your assertion or is that a question?

Chair: No, I am just asking, is that not the case? If we continue to invest into this resource we will surely achieve a subsidy-free—

Andrea Leadsom: But the point is, Chairman, that money does not grow on trees. I am rather surprised because a number of your colleagues from the Scottish National Party have taken part in and held debates themselves on fuel poverty and the very real impact of large subsidies for those bill payers. We have to prioritise and it is the case that offshore wind offers enormous potential for decent load factors, for more reliable electricity, as well as for the costs to come down very rapidly and the fact that Scotland will continue to benefit from those auctions that are coming up. Money does not grow on trees. If we want to do support for offshore wind and onshore wind, and I think you are suggesting every other renewable technology, that will put an unacceptable burden on bill payers and we are not prepared to do that.

Lord Dunlop: I read with interest what the Scottish Government Minister said in front of your Committee last week. I was very encouraged by the constructive and realistic tone that he adopted, his recognition that the right way forward is to compete for the lowest cost of meeting our renewable targets and in that being technology-neutral. I very much welcome the constructive approach that he was adopting last week.

Q450 Kirsty Blackman: How much does it add to consumers’ bills? How much is the additional cost of onshore wind? You are talking about it being expensive and adding money to consumers’ bills. How much does it add to consumers’ bills?

Andrea Leadsom: I am sorry, I am not sure. Are you talking about specifically how much—

Kirsty Blackman: With the subsidy, how much does the subsidy cost?

Andrea Leadsom: Are you talking specifically about onshore wind?

Kirsty Blackman: Yes.

Andrea Leadsom: What I can tell you is that the saving of closing the RO a year early has different projections. In the central scenario closing the RO a year early across all bill payers would save £20 million in aggregate. That is with the central scenario, but what we found is that the high scenario of deployment has tended to be closer to the mark and were the high scenario of deployment to be the case, it would save £270 million in aggregate from consumer bills.

Q451 Kirsty Blackman: How much is that per consumer, do we know?

Andrea Leadsom: Off the top of my head—do you have that number?

Tom Luff: We have.

Chair: I think Bloomberg said it is half a cup of cappuccino per day.

Andrea Leadsom: In the high scenario it is £3.40 on an individual bill but the point being, of course, that in aggregate terms, at a time where the Office for Budget Responsibility projects the levy control framework to be massively exceeded, closing the RO a year early is one of several measures to keep down the costs to consumers.

Q452 Kirsty Blackman: Just on that, Hinkley Point C’s projected costs are £4.28 minimum a year to consumers, which is more than the £3.40.

Andrea Leadsom: Hinkley Point C will generate 7% of electricity in dispatchable form to the United Kingdom, so it will be baseload power. It also will not be producing until 2025 and you can’t compare a current price with a future price. You need to take all sorts of assumptions into account to be able to compare those precisely, including issues like inflation, the wholesale price of electricity and so on. It will be dispatchable baseload power, which onshore wind is not as things stand, so you can’t really directly compare those two things.

Q453 Chair: We could compare the prices, which I think has just been demonstrated and it seems to be significantly cheaper. We will get to intermittent—

Andrea Leadsom: What we are talking about is a closure of onshore wind subsidies versus the counterfactual, which includes assumptions on how much would deploy if we did not close it early. To say that 7% of the UK’s electricity would cost £4.80 per head versus whatever might deploy if we did not close the RO a year early is only £3.40, however reliable that might be, you are massively comparing apples with pears there.

Q454 Chair: Could you help us with this one, because we are finding it very difficult to locate these figures? You talked about the levy control framework and, fair enough, the Government have made their intentions quite clear with this and up to 2021 you have given how much you are prepared to spend on this. Is there a geographical breakdown of the levy control framework and is there anything available to this Committee that could compare like with like so that we could realistically compare nuclear with onshore wind, with other renewable technologies and thermal generation? Can we get that?

Andrea Leadsom: We are doing a huge amount of work in the Department on the whole price of every different technology. It is not just a matter of the subsidy either. You also have an impact of the transmission cost, the location of that unit and so on. We are, as we speak and we have been for some months now, trying very hard to get a complete handle on the total costs of every different part of electricity generation, which would also include things like capacity payments and black start payments and so on. We are making a significant amount of progress on that. But in truth, because the levy control framework is socialised so everybody pays for it in their bills, you would divide the total amount by the head of population across GB and then you would take 8% of that, which is the Scottish population, and that would give you the levy control framework per head in Scotland, but I don’t think that would really tell you anything. More useful, possibly, is the fact that a significant proportion of all subsidies has gone to Scotland. As I said at the beginning, although Scotland is only 8% of the population of the UK, 24% of the RO spend has gone to Scotland and of the 25 CfDs issued, 11 have gone to Scotland.

Q455 Chair: Can we see a geographical breakdown of the levy control framework that demonstrates that is the case? We are finding it very difficult to see—I know it is globally asserted that Scotland is securing all this extra subsidy and we are going to be building Hinkley Point, but let’s just forget about the subsidy for that because that is of national importance and it creates this baseload, so there is always a reason, an excuse to find the funding and extra resource for that. All we are asking is to see what we are getting per head and to challenge a little bit about some the assertions that are made. Let’s not compare apples with pears because it looks like we are trying to compare apples with pomegranates when it comes to this. We will see if we can secure this information that will maybe help this Committee a little bit more. Would that be all right, Minister?

Andrea Leadsom: I am not quite sure what you are asking, Chairman.

Chair: What I am asking for is quite clear. It is a geographical breakdown of the levy control framework about how much these billions of pounds, which is predicted year on year to be spent on this, will be broken down per head geographically. Is that possible?

Andrea Leadsom: As I say, it is socialised so everybody pays pro rata on their own fuel bill.

Q456 Chair: We will leave that alone just now and I want to come back on to something that Lord Dunlop said. I am grateful, Lord Dunlop, that you were paying attention last week, as I would expect from a diligent Minister like yourself. What you will have heard, and I think something that particularly appalled this Committee, was the lack of consultation between this Government and the Scottish Government on something as important as an early announcement on renewable obligations, given our responsibilities on this and the obligations that we have for climate change targets. We have managed to secure, as further evidence, a list of the correspondence and the letters that went from the Scottish Government to Ministers here. Where there has been information exchanged, there was no attempt to listen to the Scottish Government and its concern. It is an exercise that could barely be called a consultation. Why did this happen?

Lord Dunlop: The first thing I would say, as has already been said, is that this was a manifesto commitment, so it was very clearly signalled in advance. I would reiterate what I said. From my engagement with industry, they had seen that signal in the manifesto and had already begun to think about what the implications of that were for their businesses. Immediately after the election there was contact between DECC Ministers and Scottish Government Ministers to discuss what was coming down the track. Subsequent to that decision, there was a lot of engagement. Indeed, the Scotland Office facilitated some of that with a round table with industry in Edinburgh involving DECC officials. I think you have to bear in mind the circumstances: a manifesto commitment, implementing quickly that manifesto commitment, the engagement between DECC Ministers and Scottish Government Ministers, and then actually sitting down with the industry to talk about the practical implications, and that is where you get into the whole debate about grace periods.

Q457 Chair: What I am hearing here, Lord Dunlop, is not so much Scotland’s voice around the Cabinet table but the Conservative Government’s voice to Scotland. All you are doing is basically again glibly asserting something. There are a couple of choice comments from the correspondence that we were presented with this week. This is from the First Minister, “I strongly disagree with the decision that has such a profound impact on a key sector of the Scottish economy”. From the Minister who was responsible for climate change targets, “Your intention to close the RO ahead of schedule has generated considerable and widespread uncertainty and concern across the renewables sector”. These are just two of a whole list of concerns from the Scottish Government, that I have here. What were you doing?

Lord Dunlop: I think you have to recognise that there is a genuine policy difference here. The Government’s view was to implement the manifesto commitment and we have gone through all the reasons why we wanted to, going forward, focus resources on those less well established technologies, and to get that balance between all the three aspects, security of supply, meeting our environmental commitments but also how do we protect consumer bills. Those were the clear principles behind which we were operating and, within that, once that decision had been made then it was to engage with industry at the Scottish Government on how that would be implemented in a way that industry could manage.

Q458 Chair: Is there not a shred of your obligations to the job and your sense of responsibilities to Scotland that you could actually stand up and say, “We have 70% of the resource. We are massively investing in all this. We are trying to set world record targets”, could you not turn round, as a Scotland Office Minister, and put the Scottish interest in this?

Lord Dunlop: I think, as we have already seen, Scotland has done very well out of the resource that has gone into renewables, reflecting its very important place in the overall mix, and we expect that to continue in the future.

Q459 Chris Law: Could I ask a question regarding a timeline? There was a manifesto commitment and then there was correspondence you said between DECC and also the Scotland Office with the Scottish Government. Could we get sight of these letters, first of all? I also want to ask a second question, which is: how involved is industry in renewables, in particular onshore wind, involved in any discussions prior to a manifesto commitment? If there has not been any it must have come as a horrific shock for those who have invested in many companies, in fact invested millions, only to find that they are going to get cut very short by those commitment, so I want to know if there has been some advance notes to them and what negotiations had been made?

Andrea Leadsom: I can tell you that on 3 June the Secretary of State received the letter from Fergus Ewing. On 8 June 2015, there was a phone call between the Secretary of State and Fergus Ewing. On 11 June there was a letter from the Secretary of State to Fergus Ewing—

Chris Law: Can I just stop you there?

Andrea Leadsom: Yes.

Q460 Chris Law: Sorry, my apologies, I am asking before. I am not asking about since the election in May. I am asking pre-May 2015, so making a manifesto commitment must have been based on discussions you had either with Scottish Ministers about what are needed in Scotland regarding onshore wind or, indeed, onshore providers of those who are preparing for renewables obligations. Can I just ask again what negotiations, what discussions were had with both industry and the Scottish Government prior to making this manifesto commitment? I understand arguments about you are looking to make savings but I want to know: was an assessment made of the impact, both on industry and of course for those who are looking to either set up businesses or, indeed, are already undertaking contracts at the moment?

Andrea Leadsom: The simple answer to that is: I am not aware of what discussions took place, simply because I was at the time the Cities Ministers and I was not privy to discussions so I am afraid I cannot answer that question, Mr Law, and would be happy to do so. I would like to make a couple of points. First that that manifesto commitment was signalled long before the general election of 2014. I do not have the quotes but I certainly, in the passing of the Energy Bill, used a number of quotes ranging from the Prime Minister to previous Energy Ministers, making very clear that, should a Conservative Government be elected, we would seek to withdraw the subsidy for onshore wind. I think there can have been no doubt that, if a Conservative Government were elected—and it is of course a reserved matter that particular subsidy, but you will also be aware, Mr Law, that under the Scotland Act there is now a formal, consultative role for Scottish Ministers in the design or redesign of renewables support schemes. I apologise that I cannot specifically answer that question now but certainly, going forward, there will be those formal consultative roles.

Q461 Chris Law: Thank you. Can I put that question to you, Lord Dunlop, and also to Tom Luff, because he may also have known what was going on at DECC?

Lord Dunlop: Equally, I did not have responsibility for that at the time, so I cannot comment on what discussions took place at the time, so I would just reiterate what the Minister has said.

Q462 Chris Law: So we do not have a timeline and nobody can give me advice as to what indications for both industry and for the Scottish Parliament there would be. One example that springs to mind, which is not about onshore energy but is about the carbon capture storage. That was not in your manifesto.

Lord Dunlop: Can I make the point? We had a manifesto commitment. We then had a period of time in which there was a debate during the general election, so it wasn’t as if the manifesto was published and then suddenly it appeared to industry. There was a period of time, there was a debate and then we got into the post decision—

Q463 Chris Law: I just want to know if there had been consultations, yes or no. What is the answer?

Andrea Leadsom: We do not know the answer. I think we have been quite clear. We have apologised. Neither of us was in the Department at the time and so it is not that we are saying there weren’t any. We are simply saying that, as human beings who were not in the Department at the time, we cannot answer that.

Chris Law: Sure. No, I appreciate that. So you could provide—

Andrea Leadsom: We will seek to but I do want to say again that it was made very clear—on many occasions more than a year before the general election—that Conservative Party policy was to remove subsidies for onshore wind. It was extremely clear.

Q464 Chair: I think in Scotland we did everything we could to ensure that that would be a manifesto commitment. It would carry through and 40% of the people Scotland at the last general election supported that.

Andrea Leadsom: Yes. Nevertheless, Chairman, you will need to accept of course—

Chair: We do.

Andrea Leadsom: —that the costs are socialised. If Scotland were herself paying for the full cost then that would be fine, but this is a reserved matter specifically in part because the cost of all of this subsidy goes very heavily on the shoulders of those living in England and it would not be fair for the Scottish Parliament to make decisions that affect English bill payers. I am sure you would agree with that.

Chair: We are going to explore a few of these issues that you just mentioned too. I think before we move on—because I think we do need to move on from this—if you could, Minister, we received all the correspondence that went from the Scottish Government to Ministers in the Department of Energy and Climate Change, if it would be possible could you give us the same correspondence so we could see what was discussed and what type of conversations were had between both Governments, if that is all right. Thank you.

Q465 Mr Anderson: Can I come back to the costs of this? I think you said the central cost would have been £20 million but the high end cost was £270 million. Was there a lower cost and a central cost?

Andrea Leadsom: There is not that assessment, no. There wasn’t that assessment on the basis that all of the experience ever since the LCF was established was that the costs, the deployment, the demand and the load factors had significantly exceeded expectations all the time so it wasn’t likely that they would suddenly turn round and be an undershoot.

Q466 Chris Law: So why did you refer to it as a central cost?

Andrea Leadsom: What do you mean, why did I refer to it as a central cost?

Chris Law: You gave us two figures. When Ms Blackman asked you what was the cost you said, “The central cost was £20 million but the higher end cost was £270 million”.

Andrea Leadsom: Yes. The central cost is assuming that our forecasts are accurate which, as I say, they never have been because the deployment has always far exceeded our estimates, which is why we say the central cost, which is on our estimates, is £20 million but the high cost, which is where at the high end of expectations, which is where our experience has tended to be, would put it then at £270 million.

Q467 Mr Anderson: The Chairman put to you two things, one that the people that invest in these things advised that investing in the Scottish onshore wind economy was going down from eighth to eleventh in the world, and also we heard from Scottish Renewables. They thought there could be a £3 billion hit to the industry and possibly 5,500 jobs. Do you agree with those figures or not?

Andrea Leadsom: I am not agreeing or disagreeing with them. What I am saying is that our manifesto commitment was very clear and that—

Q468 Mr Anderson: I am sorry, I heard you the first time and the second and the third time. I am specifically asking about: we heard from people who gave us evidence in good faith saying this is their view. Did nobody do an assessment on what the impact would be? If we are losing 5,500 jobs it is a third of the state industry work in this country, basically, and we are doing lots across the service industry but if we are going to lose 5,500 jobs out of the economy surely that is something we should be prepared for.

Andrea Leadsom: Absolutely, but I think very key to this is that Scotland has benefited enormously—as I said at the beginning, the renewables sector is around £5.5 billion of turnover and around 21,000 jobs in the Scottish economy. That is all very recent growth as a result of this stunning expansion in renewables that far exceeds our forecasts and your own. As your Chairman has just pointed out, the Scottish Government has met its own renewables.

Mr Anderson: It is not my Government, sorry. I wish it was. It is not my Government.

Andrea Leadsom: I said the Scottish Government has met its—

Mr Anderson: You said your own.

Andrea Leadsom: Sorry, I was looking at the Chairman as I said that, I beg your pardon.

Mr Anderson: All right.

Andrea Leadsom: The Chairman has pointed out that the Scottish Government has met its targets six years early, so all I can do is repeat the fact that this has been a fantastic success story for Scotland and for the UK and it has exceeded our expectations. Of course, when you decide to subsidise an industry, you are not deciding to do that because you just want to create jobs where there are not real jobs, you are doing it because you can see the potential for the low carbon sector to be a real job creator of the future. So you make a budget on what you can afford to spend on getting that off the ground and, in order to do that budget, you have to make various assumptions about deployment and load factors and so on. What I am saying is it has been massively more successful than our wildest dreams and so, because we have already met in our projections already, we have exceeded our renewables targets to 2020, we actually have to focus on mitigating the costs for consumers and that is why we have done this.

Q469 Mr Anderson: I have to tell you we are hearing from organisations, and individual business on the ground, that the lack of confidence that you have inspired in them is having a negative impact on development.

Andrea Leadsom: I absolutely understand that. I have had a number of meetings with investors and with developers and I absolutely do understand that but, equally, I am sure, Mr Anderson, that you would agree that when there is a set amount of money that is reasonable to use of the bill payer, we should not continue to put all of our eggs into one basket. Our entire energy policy rests on the idea that we have diverse energy sources and we want to focus on building more offshore wind to get that cost trajectory down. We want to do more on the renewable heat incentive. We want to do more on new nuclear. All play a part and you don’t just want to have all your eggs in one basket. There is a balance to be struck and that is what we have tried to do, to be fair to developers and at the same time fair to consumers.

Q470 Mr Anderson: Can I move on to the practical implications for generators who are providing onshore wind and, ultimately, offshore wind and other types of intermittent generation? The Secretary of State has said that the intermittent generators of electricity should be responsible for the pressures they add to the system. Can you tell us in practice what that means?

Andrea Leadsom: As I mentioned earlier, we are doing a lot of work to try to look at whole system costs, and of course we are all extremely excited about the prospects for storage coming down the track. We hope that in the next few years there will be a significant amount of storage available, which could of course then store electricity that is generated at the time it is not needed for a time when it is needed.

One of the exciting things I think about my Department is we don’t know what we don’t know. There is so much innovation. There are so many great new ideas and, since none of us have a crystal ball, it is hard to see exactly who the winners will be of the future. So what we try to do is to be as technology neutral as we can be and to deal, using the amazing technological improvements, ideas and advances, to get to a point where we are balancing the system so we do not have too much intermittency or too much baseload, but where we are using the opportunity of decarbonising, using enough dispatchable power and then taking the benefit of lower carbon technologies but keeping that system in balance. It is a difficult task and it is something that we don’t want to overload with just renewables that are intermittent and of course, at the same time, we don’t want to overload with coal-fired power stations because that does not meet our decarbonisation targets. The balance between keeping the lights on, keeping the bills down and decarbonising is quite a challenge and it is one that we do try hard to maintain.

Q471 Mr Anderson: I am no clearer than where I was when I asked the question. We went to the Orkneys and there was a place there with five wind generators. If that man had said to me, “I have been told that I have to be responsible for the pressures I add to the system because I am producing electricity that is intermittent” what would my answer to him be?

Andrea Leadsom: We do want to move towards a fairer system where you pay for the full costs on the system. There is no doubt about that. That would be the right thing to do, but that of course then does depend very much on the location and on the existing pressures on the system and so it is very difficult. There are always winners and losers. If I was to say in—I don’t know—Cornwall, for example, “Everybody who wants to put a domestic rooftop solar plant connection to the grid has to pay the full cost of that”, and then with the 150th person we now need to massively double the size of the transmission network, it would not be fair to say, “Right, so because you are that 150th person you now have to pay for that”. I am afraid I am not giving you a very clear answer because there really isn’t one. We do want to move towards a—

Q472 Mr Anderson: What is your policy, though? You have a policy with no answer.

Andrea Leadsom: No, no, the policy—

Mr Anderson: Your stated policy is that intermittent generators of electricity should be responsible for the pressures they add to the system.

Andrea Leadsom: Yes.

Mr Anderson: I don’t know what it means. I have worked with electricity generators. I don’t know what you are talking about.

Andrea Leadsom: What it means is that we do want to move to a scenario where the generators pick up the full costs, so that means they are picking up the costs of connecting to the grid, of possibly over-burdening the grid that sometimes occurs, and possibly of the storage. If they are an intermittent technology that they could pay the costs of the storage that then enables them to become dispatchable and so on, so it takes into account a lot of factors. What I am saying is you cannot take a purist view because, with the example I just gave, you would find that the nth person to connect ends up paying for the next 1,000 connections because they happen to be the one that overloaded the system. It is a very complicated area but we are trying to move towards an environment where we fully understand the costs of each individual generator on the system and, as far as possible, we make it fair to them and to the one that comes after and the one that came before, so that they are paying the full costs of their own generation.

Mr Anderson: I would suggest that anybody listening to that last exchange who is thinking of going into this would be put off even more than what they already are by uncertainty.

Chair: I think we will leave that one there. Have you finished, David?

Mr Anderson: Yes.