The Scottish Government

The Scottish Executive

Response to "Renewable Energy in Scotland"

Enterprise and Culture Committee, 6 ^th Report, 2004

1. The Executive is grateful to the Committee for the spotlight that its inquiry has shed on renewable energy matters. Promoting renewables is a high priority commitment for the Executive, in light of its potential benefits to Scotland's environment and economy. The passage of the Committee's inquiry, and the time given by all those who submitted evidence and appeared before the Committee, have done a great deal to raise awareness of this important subject.

2. The Executive believes that there is a great deal of commonality between the Committee's conclusions and the policies and measures currently in place. Both the Executive and the Committee share the view that renewables will play an essential role in tackling climate change, and that the opportunities for economic growth are significant. The following response reflects this consensus whilst, where relevant, explaining why the Executive is taking a different approach to that recommended. The Committee's key messages are taken directly from the report and noted below in bold; the Executive's response has been structured to take account of these.

Scotland's Renewable Strategy

3. The Executive agrees with the Committee that, although hydro will also make a large contribution, the new capacity required to meet its 2010 target is likely to be met mainly by the development of on-shore wind. It is a proven and competitive technology, and is at present the most economical of the renewables technologies. The cost to consumers of meeting our targets is an important factor, the ability of onshore wind power to produce electricity, benefit the economy and environment, and to keep additional costs low should be borne in mind.

4. The Executive has several times, not least in its submission to the Committee, underlined its determination to develop a wide and diverse spread of renewable energy sources. This pledge was first issued in the Executive's renewable energy strategy published in May 2003, whose key conclusion was that actions should be taken to ensure that the 2020 target was met through the deployment of a range of renewables technologies. This principle sits at the heart of the Executive's policies on the development of renewable energy. Moreover, while the focus is on encouraging the development of technologies other than on-shore wind in order that they can make a major contribution to the 2020 target, the Executive believes that the policies that it is pursuing could lead to these technologies making some contribution also to the 2010 target.

5. On 2 August, the Forum for Renewable Energy Development in Scotland (FREDS) published its conclusions relating to marine energy - "HarnessingScotland's Marine Energy Potential". FREDS believes that if government, industry and academia can together create the policy, financial and planning framework, then by 2020, 10% of Scotland's electricity production can come from marine resources. The Executive accepts that view and will work with industry and academia to advance the agenda suggested by FREDS. The Report's publication was met with the announcement by the Department for Trade and Industry (DTI) of a new UK-wide £50 million Marine Renewables Deployment Fund, which has been welcomed as a massive boost by the sector. The Executive responded by outlining its own plans to alleviate the costs of grid connection for early marine energy projects in Scotland.

6. The Executive has of course already taken action to enable developers to accelerate the commercial deployment of marine energy devices in Scotland. It is the major funding partner in the European Marine Energy Centre in Orkney (EMEC). The wave test facility at the Centre, which provides testing and accreditation facilities, was officially opened on 10 August, and the first device is on station. The Executive also announced on 10 August that, subject to the necessary planning permissions being obtained and financial support arrangements being agreed, EMEC would be expanded to provide a tidal test facility. The Executive fully believes that the facilities and authority afforded by this Centre, allied with the new funding, will draw developers to Scotland and place this country at the forefront of marine technology development.

7. The Executive also believes that there is scope for the development of offshore wind around Scotland, and has already granted consent to such a project in the Solway Firth. The Executive has also funded studies aimed at assessing the possibility of establishing a very large windfarm (up to 1 GigaWatt in size) in the waters of the Moray Firth. Such a scheme, if feasible, would make an enormous contribution towards the meeting of the Executive's targets, and have positive benefits in terms of manufacturing and installing the required equipment.

8. The Executive shares the Committee's view that Scotland is well resourced with the raw materials for the exploitation of energy production from biomass, and has asked FREDS to consider the actions that are required to promote and accelerate the use of this technology. The Executive expects that the conclusions will be available in the late autumn. The Executive is also taking action, again through FREDS and as recommended by the Committee, to ascertain the action that requires to be taken to commercialise hydrogen fuel cell technology. The Executive expects this advice to be available in spring 2005.

9. The Executive will consider, with Highlands and Islands Enterprise and other partners, how best to encourage the development of community based wind farms. It is also considering how best to continue supporting the development of very small scale renewables, which are currently supported by the Scottish Community and Householder Renewables Initiative. The SCHRI, providing funding worth £5 million over its current three year cycle, has so far funded over 150 new renewables projects, covering such technologies as solar heating and photovoltaics, micro wind turbines, geothermal heat pumps and wood fuelled biomass. The Executive expects to be able to make a further announcement about the SCHRI during the autumn.

The Planning Framework

10. The National Planning Policy Guideline for Renewable Energy Developments (NPPG 6) was last revised in 2000 and a Planning Advice Note for Renewable Energy Technologies (PAN 45) was revised in 2002. The Executive strongly believes that this guidance continues to provide a fair and robust method of assessing renewables projects, striking a fair balance between development and conservation needs, although in an area where technological development is fast moving, the guidance requires to be kept under review. However, it is also important that developers are provided with a degree of certainty about the planning requirements that will be applied and that the guidance is not altered without good reason. The Review of Strategic Planning- Conclusions and Next Steps published in 2002 announced a programme of review of all national planning policies including the review of NPPG 6 programmed for 2006. The Executive will commission research to inform the proposed review and update of national planning policy on renewable energy developments before the end of the year. Consultation on draft revised guidance will take place later in 2005 and updated Scottish Planning Policy on Renewable Energy Development will be published in 2006.

11. This review will also enable the Executive to consider closely the points made in relation to NPPG 6 during the inquiry. The Executive believes that NPPG 6 already ensures appropriate levels of protection are given to designated landscapes and local communities and that only acceptable proposals should proceed. Indeed, the public interest in specific wind farm projects means that all applications are subject to rigorous scrutiny. This does, of course, raise resource issues for local authorities and the Executive is also looking at how this should be resolved.

12. The Executive has considered the Committee's view that it must take an active lead and develop a national strategic framework for wind farm applications, engaging local authorities in the process. The Executive's policy is based on the principle that renewable energy developments should be accommodated throughout Scotland where the technology can operate efficiently and where environmental impacts can be addressed satisfactorily. The Executive believes that decisions about the exact location of wind farms are best decided locally within that structure. To do otherwise - for example, for central government to set local targets - would be to close down areas of the country where wind developments could be accommodated satisfactorily. Examples exist, for instance at Hadyard Hill, of developments granted consent which would have not have advanced from the drawing board under a system of locational guidance. The Executive does not propose, therefore, either to set local targets for wind-farm developments or to identify preferred areas for such developments. Local development plans have an important role to play in guiding developers to locations where renewable energy developments are likely to be permitted after taking account of environmental and amenity considerations. However, this should not be seen to rule out other sites where proposals can be accommodated in a satisfactory manner. It follows that local councils are best placed to judge when cumulative impacts of wind farm developments would be unacceptable. This too is an area where local circumstances would determine the outcome of an application.

Green Jobs and Economic Development

13. The Executive welcomes the Committee's finding that Scotland is in a unique position to create significant numbers of green jobs through encouraging and investing in leading edge renewables technologies. The Committee will be aware of the Executive's draft Green Jobs Strategy, which is currently out for consultation. The Executive is also working closely with Renewables UK, Scottish Enterprise and Highlands and Islands Enterprise to take forward the conclusions of the Gap analysis study which was published earlier this year. The Executive will discuss with the enterprise networks how the Committee's recommendation that the latter should treat renewable energy as a priority sector can best be taken forward. The Executive agrees with the Committee's view that it is important to look also at the skills aspects of developing the sector and will, at its next meeting, invite FREDS to provide advice on what needs to be done.

14. The Executive agrees with the Committee regarding the potential economic rewards available, and can demonstrate a strong working partnership with the enterprise networks in seeking to develop Scotland's renewable energy sector. Scottish Enterprise and Highlands and Islands Enterprise are both funding partners in the construction and development of EMEC, and are currently working with the Executive and other funding partners to take that Centre to the next phase of its development. Scottish Enterprise has also committed £150 million over ten years towards the Energy Intermediary Technology Institute in Aberdeen, whilst both bodies are also represented on FREDS, working with other sector stakeholders to develop the economic potential of renewables in Scotland. The Executive welcomes this close engagement and participation by the enterprise networks, and anticipates its continuation as the sector continues to develop.

Scotland's Energy Policy

15. The Executive agrees about the importance of a coherent and well-understood policy in respect of those aspects of energy that are devolved to Scottish Ministers: the promotion of renewables, energy efficiency, and measures to relieve fuel poverty. The Executive believes that such a policy is already in place, as discussed below, with particular reference to the points made by the Committee.

16. The Executive also agrees about the importance of co-operation with Westminster. All areas of energy policy other than those outlined in paragraph 15 are reserved. This means, for example, that Scottish Ministers do not have powers to make decisions about the provision of non-renewables generation. Equally, our policy in devolved areas of energy can only benefit from close cooperation with UK Government colleagues, and from continuing coherence between their energy policy objectives and our own.

17. The Executive's response to the 2003 Energy White Paper, Our Energy Future - creating a low carbon economy - made clear our agreement that UK energy policy should be delivered through a market framework, and supported the choice of key drivers which should underpin current and future energy policy:

• to reduce carbon emissions;
• to maintain secure and reliable energy supplies;
• to promote competitive markets; and
• to ensure that every home is adequately and affordably heated.

These broad objectives, fully endorsed by the Executive, are supported by regulation, fiscal regimes and, where necessary, financial support. But it is for the private sector to develop the systems and the infrastructure that are necessary to deliver these objectives in the most economic, efficient and effective way, and to bring forward proposals about the exact provision and location of energy infrastructure.

18. The Executive's policy on the promotion of renewables is compatible with that of the UK Government. The Executive has set national - and minimum - targets for renewable generation. While it believes that these targets should be met by a mix of renewables technologies, it has not set targets for individual technologies. This is because the renewables landscape is constantly changing, with new technologies - such as wave and tidal stream - being developed and the existing technologies such as on and off shore wind evolving further. FREDS was set up to assist the Executive in developing these policies, and to ensure that all technologies receive the support necessary to develop.

The Renewables Obligation (Scotland)

19. The Executive agrees that the Renewables Obligation (Scotland) - the ROS - has been successful in bringing forward new renewables developments. Moreover, it should be pointed out that the ROS has resulted not simply in new onshore wind capacity, but also new hydro and co-fired biomass output. However, the Committee seeks its amendment in a way that will see it provide more of a boost to other renewables technologies.

20. The Executive is committed to keeping the ROS under review, in close consultation with the UK Government, the industry, the finance sector, and the regulatory authorities, as the Committee has recommended. As the Committee is aware, a number of technical amendments were made with effect from 1 April 2004, chief amongst them a change to the rules governing co-firing in order to encourage the use of biomass and energy crops as a renewable resource. The Executive will shortly be consulting about further changes to take effect from 1 April 2005. These will include:

• measures to secure the buy-out fund;
• measures to allow UK trading in Renewables Obligation Certificates; and
• proposals to extend the level of the Obligation out to 2015-16.

The Executive is also consulting on the terms of reference for a fundamental review of the workings of the Obligation that will take place in 2005-06, again in close consultation with the UK Government and interested parties.

21. The Executive believes that it is important to maintain confidence in the Obligation framework that has been established and which is proving so successful, as the Committee has pointed out, in bringing forward new renewables developments. The market created by the Obligations is extremely sensitive to uncertainty, as previous events (the collapse of the supplier TXU, for example) have proved; continued investment in renewables requires that any amendments proposed and carried forward work with the grain of the market. In its announcement about the terms of reference for the 2005-06 Review, the Executive has said that it does not intend to alter the basic operating principles of the ROS, and that it will remain in place until 2027. The consultation document also highlights the Executive's desire to work with all interested parties in considering amendments where there is a strong case for intervention, while taking care not to discourage investment in either the existing or the newer technologies. In considering the amendments that should be made to the ROS, the Executive will take into account the views expressed by the Committee.

Energy Efficiency and Conservation

22. The Executive fully endorses the Committee's view that an effective energy policy should include measures to reduce energy demand through energy efficiency measures. While UK energy efficiency policy is reserved, the promotion and marketing of energy efficiency is fully devolved to the Executive. The Executive devotes significant resource to this objective - with £10 million a year allocated to funding major UK energy efficiency programmes run by the Carbon Trust and the Energy Saving Trust.

23. Energy efficiency measures sit within a complex policy environment, and support several different policy objectives including:

· Improved profitability and competitiveness for Scottish businesses - improved resource efficiency leading to reduced energy bills and reduced overheads;

· Better efficiency in the provision of public services through reduced energy use;

· Reducing greenhouse gas emissions which contribute to climate change;

· Moving towards a sustainable, lower-carbon economy ;

· Reducing domestic energy bills and making homes more comfortable;

· Reducing the number of households living in fuel poverty;

· Reducing pollution from transport and other sources.

24. The Executive promotes energy efficiency across the business, domestic, public, and transport sectors. In the business sector, through the Scottish Energy Efficiency Office (SEEO), the Executive funds the Carbon Trust's Action Energy programme - which runs major advertising campaigns to promote energy efficiency to business and offers free energy audits to individual companies. In addition the SEEO supplements this direct funding of UK programmes by using its resources to support a local marketing force across Scotland and its own team of energy advisors, who conduct site audits for SMEs.

25. A toolkit has also been jointly developed with business organisations such as the Federation of Small Business in Scotland . This toolkit assists small businesses to adopt good resource efficiency. The SEEO works in partnership with other key energy, environment and business networks and trade associations to provide practical support and advice to their members. In 2003/04, the SEEO and the Carbon Trust carried out over 600 energy audits in Scotland. These audits identified potential savings to Scottish business of around £15m and carbon savings of 228,000 tonnes - enough to power 35,000 homes for a year.

26. In addition, the EU Emissions Trading Scheme will start on 1 January 2005 . The scheme will cap carbon dioxide (CO ₂) emissions from heavy energy users in business and the public sector and is expected to reduce UK CO ₂emissions by around 5.5 million tonnes.

27. The Executive has supported domestic energy efficiency and conservation through insulation and central heating measures via the Warm Deal and Central Heating Programme. The Warm Deal has insulated over 197,000 houses since 1999 and the Central Heating Programme has provided insulation and central heating to 39,000 houses since 2001. These measures help retain heat in the home and reduce carbon emissions. We are committed by 2006 to reduce the number of houses with poor energy efficiency by 20%. Further, we support a post within the Energy Saving Trust (EST) to promote the Community Energy Programme (CEP). The CEP provides grants from a £50 million fund to encourage community heating (often known as district heating). Community heating uses one central source of heat to supply to multiple buildings, be they homes, schools, hospitals or offices. So far Scottish schemes have received £10.8 million out of a total of £28 million representing 38.6%. of funding overall.

28. In the transport sector, the Executive funds programmes to incentivise the development and demonstration of, and increase awareness and take-up of, clean low-carbon vehicles for which the market is not yet fully developed. In addition, other fiscal measures (such as fuel tax, road tax, and company car tax) have a significant impact on encouraging greater energy efficiency in vehicle use. The 3 main transport programmes supported by the Executive are Clean-Up, PowerShift and Autogas+. In the current financial year, the Executive funding is £1.7m for Clean-Up, £0.38m for PowerShift and 0.62m for Autogas+.

29. The Clean-Up programme, launched in November 2002, is managed by the Energy Saving Trust (EST), and provides grants towards the cost of fitting vehicles, such as lorries and buses, with emission reduction equipment. It aims to improve air quality in urban areas by reducing emissions of key pollutants such as particulates and nitrogen oxide. The programme has supported over 440 vehicles in Scotland since its inception.

30. PowerShift is a UK market transformation programme, funded in Scotland by the Scottish Executive and run by the EST. It aims to develop a sustainable market for alternatively fuelled vehicles. It provides information, part funds clean fuel vehicles, and aims to expand the infrastructure for such vehicles. The programme offers grants to assist with the purchase and conversion of vehicles to run on a range of alternative fuels such as compressed natural gas and liquid petroleum gas (LPG). It also assists with the purchase of electric vehicles. PowerShift in Scotland supported 350 vehicle conversions in the last financial year.

31. The Scottish Executive, through its Scottish Energy Efficiency Office, launched the autogas + programme in July 2002. The programme, created to take account of particular Scottish circumstances such as slower LPG take up and rural accessibility, complements the PowerShift programme rather than replaces it. Autogas+ primarily intends to increase uptake of LPG by increasing accessibility to grants for motorists to convert their cars and light commercial vehicles. In addition, the programme sets higher conversion standards than those required under the UK programme, and supports the development of a wider network of qualified and approved installers and more re-fuelling points to enable easier access to LPG. Autogas+ converted 259 vehicles in Scotland in the last financial year.

32. The Executive is also committed to improving energy efficiency in the public sector. Earlier this year the Executive announced the launch of the Public Sector Energy Efficiency Initiative. Under this initiative £20m in new funding is being provided over the next 2 years to implement energy efficiency measures aimed at reducing carbon emissions across the public sector in Scotland . This scheme covers all local authorities, health boards and Scottish Water. This funding will be used to set up revolving funds to be administered at local level. The savings from energy efficiency measures will then be used to invest in new energy efficiency measures and to improve frontline services.

33. The impact of this initiative will be significant - delivering:

· a 20% reduction in energy consumption by local authorities and Scottish Water, and a 15% reduction by health boards over 5 years;

· a saving in public sector energy bills over the first 5 years estimated at around £70 million (and an ongoing saving of up to £30 million per annum thereafter);

· a reduction in carbon emissions estimated at around 500,000 tonnes of carbon over the first 5 years (and around 100,000 tonnes of carbon per annum thereafter).

Sustainable Energy & Public Procurement

34. All electricity purchased by the Executive itself since 2000 has come from renewable sources. In 2003-04, the Executive and its partners purchased some 4% of the total renewable generation capacity in Scotland . So far as the wider public sector is concerned, all Accountable Officers are now under a duty to make arrangements which secure Best Value, and in doing so to contribute to the achievement of sustainable development. The Best Value duty applies to all activities, including procurement and procurement policies. The Executive publishes guidance on sustainable procurementwhich explains how energy efficiency issues should be taken into account by purchasers when writing specifications and considering tenders from suppliers. Public sector bodies undertaking Public Private Partnership projects are encouraged to take account of environmental considerations in procurement, including the use of sustainable energy.

The Grid

35. As the Committee recognises, issues relating to the upgrading of the grid, apart from planning and consent issues, are reserved. The Executive is nevertheless fully involved in discussions that the Department of Trade and Industry is having with the GB transmission companies and the regulator, Ofgem, about the grid infrastructure that is required in order to deliver the UK and Scottish renewables targets. The Executive is considering whether a general policy statement might be made, in partnership with the DTI, which would set out the national case for energy infrastructure, as recommended by the Committee.

36. The Committee will also be aware of Ofgem's recent announcement regarding additional investment in the Scottish electricity transmission network. Investment in the transmission network is regulated through the transmission price control reviews. However, as the last such review could not have foreseen the network upgrading required to support the Executive's renewable targets and the next control period is not due to commence until 2007, Ofgem are proposing a new funding mechanism which will allow investment for network upgrades without delay, ahead of the next price control period. The Executive believes that this is very good news for the Scottish renewables sector, as Ofgem's announcement is likely to help support the current momentum of renewables development in Scotland.

37. Ofgem has also indicated that certain upgrades, where the case for efficient investment has already been made, will be authorised immediately. This includes investment of up to £360 million in Scotland, including £350 million for the construction of the Beauly-Denny and Sloy reinforcements (subject to the necessary consents being obtained).

Conclusions

38. The Executive welcomes the report by the Enterprise and Culture Committee and the opportunity to comment on its findings. In particular, it welcomes the Committee's firm support for its commitment to increase renewable energy generation and to the ambitious targets that have been set. The Executive believes that its support for renewables and determination to develop as wide a range of technologies as possible will enable its targets to be met, create significant economic and environmental benefits for Scotland, and can offer sustainable energy solutions to communities and households across Scotland.

39. Achieving these aims will mean the continuation of the successful partnership approach adopted thus far, and embodied in the work of FREDS, the delivery of the European Marine Energy Centre and the operation of the Scottish Community and Household Renewables Initiative. The Executive will also maintain its close engagement with the regulator and UK Government partners to ensure that the right levels of support and the necessary infrastructure for the sector continue to be made available.

The Scottish Executive

Supplementary Response to "Renewable Energy in Scotland "

Enterprise and Culture Committee, 6th Report, 2004

The Scottish Executive should take the lead in developing renewables where private sector is risk averse (paragraph 49)

1. The support being made available to renewables by the Executive is already resulting in development where previously there would have been none. The additional revenues available through eligibility for support under the ROS, and the funding for technologies under our Scottish Community and Householder Renewables Initiative (SCHRI), are reducing the financial risk or exposure to the extent that businesses, communities and households are choosing to build or install sustainable renewable technologies and solutions. FREDS is also focused on reducing risk and supporting the development of emerging technologies by working with the private sector and others on strategic development issues. The Executive will continue to work closely with the private sector and other stakeholders to bring a wide range of renewables developments and technologies to fruition.

Scotland is different from the rest of the U K in that our climate means that there are greater benefits to be had from, for instance, building insulation. Scotland's model for energy conservation should be the Scandinavian states, who are many years ahead of us in this area. (paragraph 64)

2. Scotland has a different climate from the rest of the UK and we currently have the highest standards for thermal insulation of new buildings in our building regulations, when compared to the other UK Administrations. Scotland also has a different climate to most of the Scandinavian states, in that we do not experience their severe cold winter temperatures (e.g. -350C). We need to observe what the Scandinavians do, but also learn lessons from their efforts in order to avoid related issues such as mould growth in our own domestic properties.

Commercialisation of hydrogen fuel cell technology (to balance intermittency) should be a focus for investment by the Scottish Executive (paragraph 155)

3. The Executive has tasked the Forum for Renewable Energy Development in Scotland with producing a report that will develop an understanding of hydrogen and fuel cells, their applications and markets, that will assess the current status of these technologies within Scotland and that will identify possible opportunities for Scotland within the hydrogen technologies supply chain. This work is underway and FREDS is expected to publish its findings in the spring of next year. This work is taking place alongside work that is being led by the Department of Trade and Industry looking at the role of hydrogen energy at the UK level. The DTI is represented on the FREDS group at official level, to ensure co-ordination of activity. The Executive will work with the UK Government and will use the findings of these reports to inform its policies on developing the hydrogen economy. The new ITI Energy, to which substantial Executive funding is being directed, has already identified this technology as a key area for future attention.

The section 36 limit of 50 MW should be reviewed (paragraph 173)

4. The power to review the threshold contained in s.36 of the Electricity Act has been devolved to the Scottish Ministers by means of The Scotland Act 1998 (

of Functions to the Scottish Ministers etc.) Order 1999 (SI 1999 No. 1750). Our discussions with the industry about this suggest that there is no common view held on this recommendation. Accordingly we propose to seek the views of the new Renewable Energy Forum announced by the Deputy Minister for Enterprise and Lifelong Learning during the debate on 6 October.

The Scottish Executive should examine the level of the planning fee for proposed wind farm developments to ensure that it is adequate. The Executive should establish a system which would allow local authorities to keep, or to be reimbursed for, the value of the planning fee for all renewable developments coming under the provisions of section 36 of the 1989 Electricity Act. (paragraph 187)

5. We expect shortly to be discussing with the renewable electricity and planning authorities arrangements for reviewing fee levels for section 36 applications and to provide planning authorities with a proportion of the new fees. There are no plans to provide planning authorities with the entire fee income as we believe that the costs to the Executive of processing such applications should be covered by the fees collected.

The Scottish Executive should undertake a speedy analysis of the potential market support systems to establish the system best suited to delivering Scotland 's economic and environmental marine renewable goals. This could include varying the current market support systems, such as ROCs, to encourage the development of marine technology (paragraph 215)

6. The ROS is designed to deliver new renewables build in the most economic way possible and at an acceptable cost to consumers. The Executive notes the view, shared by many in the renewables sector (including wave and tidal device developers), that support for longer term technologies should be delivered out with the Obligation framework (supplementing the support available through the ROS itself). However, our forthcoming consultation on a Review of the ROS will seek a full range of stakeholder views on this subject. The terms of reference for the Review do not rule out any option for the provision of support for the newer technologies.

The Scottish Executive should identify the most suitable financial support method for promoting biomass (paragraph 225)

7. The Forum for Renewable Energy Development in Scotland will shortly publish its report on the actions that need to be taken to develop the use of biomass energy in Scotland, in particular using wood fuel. The Group is considering both the potential for biomass technology and the economic and environmental benefits that might accrue from its use. It is expected to make recommendations about a range of issues facing the sector, including financial support. Electricity produced using biomass attracts Renewable Obligation Certificates (ROCs) under the provision of the Renewables Obligation. New developments have also been eligible for support under the UK Biomass Capital Grants Scheme operated by the Department of Trade and Industry.

The Scottish Executive should simplify the granting of licenses to operate stills for the processing and development of bio fuels (paragraph 232)

8. The Executive will consider how best this can be resolved.

The Scottish Executive should commission a study into the development of geothermal energy (paragraph 250)

9. The Scottish Executive, through the SCHRI, is actively encouraging the use of ground source heat pumps (GSHP), which utilise heat stored in the soil, subsoil and underlying rock. Under the scheme up to 100% grants are available, via the community stream, for non-profit organisations, including local authorities and housing associations; there are 30% grants for householders. To date the SCHRI has supported 8 GSHP projects under its community stream, with grants of up to £100k, and has offered grants to 38 householders under the household stream of the SCHRI. Total support under the community stream is £270K and under the household steam £118K; GSHP is one of the top three technologies by value supported under the scheme.

10. GSHP is a mature, readily available, and cost-effective technology but is not yet widely used in Scotland. It is expected that the SCHRI will continue to fund its installation in a wide variety of community premises and households to demonstrate its benefits. We expect it to move into the mainstream over time as successful demonstrations exert their effects.

The Scottish Executive should ensure that local and national interests be considered in planning decisions on grid upgrades (paragraph 263)

11. The statutory basis for determinations on applications for grid upgrades is the Electricity Act 1989 (section 37 and Schedules 8 & 9) and The Electricity Works (Environmental Impact Assessment) (Scotland) Regulations 2000 (2000 No. 320). These require Ministers to consult both national interests, such as SNH, and SEPA and local interests, particularly the relevant planning authority or authorities, when considering applications for grid upgrades. It is already the case, therefore, that determinations involve a balance of local and national interests.

Clear and measurable targets should be set for the reduction of energy consumption in the Scottish domestic heating and transport sectors (paragraph 282)

12. Domestic Heating - We already have a clear and measurable target for reducing the number of existing properties with the lowest National Home Energy Rating (NHER) levels. We set a target through SR2002 to reduce the number of homes with poor energy efficiency by 20% by 2006, aimed at those houses with the lowest NHER. Performance will be reported through the Continuous Scottish House Condition Survey (CSHCS). The CSHCS will report towards the end of 2005, following completion of its current partial survey. Current Scottish building standards regulations require new build houses to have many energy efficiency features including the highest levels of thermal insulation in the UK. Work is progressing in this area through the Warm Deal, which has insulated nearly 10% of Scotland's housing stock so far. A review of these standards will commence in 2005 and consideration will be given at that time to a target approach (based on carbon dioxide emissions) being the appropriate way of demonstrating compliance. Further, the Scottish Housing Quality Standard requires all local authority and housing association dwellings to have whole house central heating, various insulation measures and they must reach an NHER of at least 5.

13. Transport - The Scottish Executive has not set any specific target for the reduction of energy consumption in the transport sector. However, given the environmental implications of transport energy usage, energy savings in the transport sector will be considered in the context of the forthcoming UK and Scottish Climate Change Programmes reviews and UK and Scottish Sustainable Development Strategies reviews. These reviews will provide an opportunity for the Executive to consider whether new policies and measures are required, or if existing ones need to be strengthened, to ensure that transport continues to make an equitable contribution to use of renewable resources thus reducing its impact on the environment.

14. The Executive is already supporting a number of initiatives aimed to deliver energy savings and develop renewably produced fuels. The Scottish Executive fully supports the UK Government Powering Future Vehicles strategy which promotes the development, introduction and take up of cleaner, low carbon vehicles and alternative fuels. The Executive is also represented on the Ministerial Low Carbon Group which oversees the implementation of the Strategy. Further, the Executive has contributed to the consultation paper recently published by the Department for Transport, Towards a UK Strategy for Biofuels. The paper will lead to development work on the long term use of renewable transport fuels.

Potential for disseminating good practice in linking Warm Deal and New Deal should be examined (paragraph 284)

15. We agree. The Warm Deal was set up originally to install various insulation measures and as an opportunity for people on New Deal and has successfully delivered both the insulation targets as well as the employment experience targets. We want to ensure that the good practice established in the current Warm Deal Programme by linking with other Government initiatives will be incorporated into any future programme development post 2006, wherever possible.

Visibility of promoting the concept of community ownership of renewables projects should continue to be raised (paragraph 290)

Clear policies should be developed to ensure communities in Scotland gain maximum benefit from the renewable sector (paragraph 319)

16. The Executive strongly supports the principle of Community involvement and ownership of renewables developments. Our Community and Householder Renewables Initiative has done much to raise the awareness of renewable energy amongst communities. The SCHRI is discussed at Paragraph 9 of the Executive's Memorandum, forwarded to the Committee on 25 August 2004. As at August 2004, 112 community projects, covering a range of technologies, had received funding support totalling £2.2 million; 58 of these projects had been completed. The Executive also supports the proposal by Highlands and Islands Enterprise to establish a revolving loan fund to enable communities in their area to take a stake in larger developments. The Executive is considering how this scheme might be replicated in the rest of Scotland.

17. Communities will benefit financially either through ownership of their own small renewables development or through taking an equity stake in a larger project. It has also become standard practice for large wind farm developers to voluntarily establish a fund that will benefit local communities. The decision as to whether or not to do so, plus the level of such fund, is however a matter between individual developers and communities. Scottish Ministers cannot intervene, even less impose a minimum "tariff", as they may be called upon either to determine large renewable development applications, or to determine later planning appeal cases.

The Scottish Executive should undertake research to estimate the generating capacity the market will be capable of delivering by 2020 and develop its energy policy to address any potential shortfall in supply (paragraph 309)

18. The Scottish Executive has commissioned an Energy Study of Scotland. The Study is intended to support and inform Scottish Executive policy making in a number of key areas e.g. Scottish Climate Change Programme, renewables, energy efficiency and sustainable development. The findings will comprehensively map the energy supply and demand pattern throughout Scotland. The Energy Study will identify and fill existing gaps in Scotland specific data. It will seek to identify development opportunities where cost effective and sustainable progress can be made.

19. The study will draw upon existing energy data in selected sectors, including the renewables field. Existing material from the Executive's Garrad Hassan study titled "Scotland's Renewable Energy Potential" (2001) will be used within the context of the study. The study will also identify Scotland's potential to contribute to a low carbon economy. It will look to provide case study examples to highlight best practice and encourage replication in the domestic, public and private sectors. The study report is due to be completed by early spring, 2005.