Just Transition Commission - letter to Minister for Just Transition, Employment and Fair Work: 2 November 2022

2 November 2022

Dear Mr Lochhead,

Update from Chair, Just Transition Commission

I am writing to provide an update on the work of the Just Transition Commission, looking ahead to the next phase of our work, as well as what I hope will be a timely reminder of the Commission’s findings regarding Energy in our July report.

Thank you for joining us as part of the Commission’s recent meeting on the Isle of Lewis. Commissioners felt this was a helpful and productive introductory discussion, which will inform our strategic thinking regarding priority areas of business for the Commission’s work plan for tackling our remit over the coming year. The discussion brought into particular focus the Commission’s continuing role in advising on long-term challenges and horizon-scanning, in addition to the more reactive work of scrutinising the various sectoral and regional plans. I welcome the agreement that the Commission will not only meet with you periodically but will also explore productive engagement and involvement of other Cabinet Secretaries with responsibility for relevant portfolios.

It was especially helpful to hear more about your response to the first report of this Commission, Making the Future, and we look forward with interest to reviewing a more detailed response in advance of the opening of the consultation period for the Energy Strategy and Just Transition Plan.

The Commission will have a short, intensive meeting on November 16 2022 to review our strategic priorities between now and the publication of the suite of sectoral Just Transition plans by the Scottish Government in November 2023. All further clarity regarding the timelines, process and sequencing of the drafting and development of these plans, including when and how your officials may seek to consult with the Commission, and specific areas you consider the Commission will be well placed to add value to the work in hand, would be most welcome ahead of our strategy meeting.

As we begin this phase of the Commission’s work and recognising the breadth of critical questions on which we will provide scrutiny and advice to Government, it will be necessary to build on the existing expertise within our membership by making further appointments and my Secretariat has already begun to review potential new appointments with your officials. As well as new appointments for the lifetime of the Commission, as set out in our Remit and Terms of Reference, we would like to make shorter-term appointments to provide specialist input at working group level. These individuals would not be members of the Commission. My recommendation is that these shorter-term appointments should be made as a matter of course by the Chair of the Commission in consultation with the Minister. Further detail regarding the timelines and process associated with the upcoming sectoral Just Transition plans will assist in ensuring these shorter-term appointments are made in a timely manner.

The Commission’s visit to Lewis was invaluable in highlighting a wide range of key risks and opportunities in delivering a just transition in remote and rural areas of the country, and in the Western Isles in particular. A theme that came through especially strongly was the need for policymaking on decarbonisation that takes a place-based approach to ensure fair outcomes and an equitable distribution of costs and benefits by recognising discrete local needs and circumstances. I have annexed a ‘readout’ from the visit, which I hope will be useful in sharing some major learnings and reflections.

The Commission is looking forward to reviewing a draft of the Energy Strategy and Just Transition Plan in advance of the launch of the public consultation, and would welcome the chance to discuss the draft with relevant officials at our next in-person meeting in Edinburgh on December 9. Commissioners have asked that I provide a reminder of the key priorities and recommendations as regards Energy that we published in our July report. These are as follows:

An Energy Road Map: The Energy Strategy and Just Transition Plan should have embedded within it an Energy Roadmap to Net Zero, with an associated Investment Plan. This needs to contain annual milestones through to 2045 specifying emissions reductions and quantities of CO2 to be sequestered to compensate for hard-to-abate sectors. An Energy Roadmap should provide clarity on demand so that the supply chain can invest for the future. Clear statements of intent on energy usage, activity level and the fiscal landscape are needed. Without anticipatory investment, solutions will remain costly, the transition will be delayed, and generation projects and equipment manufacture will go elsewhere. Contingency plans should be developed in case preferred solutions turn out not to be feasible.

Transmission and distribution: Rapid and substantial investment is required in transmission and distribution infrastructure across the country. Both industry-led and community-led renewable energy projects are being held back by infrastructure constraints and energy market design. However, investments that provide privileged access and duplicate existing capacity should be avoided.

Workforce planning: We need a clear picture of what the new energy economy will look like. The Energy Roadmap to Net Zero needs to be supported by a Plan on the future of energy sector jobs. This will help identify future opportunities, what skills will be prized, and where jobs will be located. It will allow us to build the workforce required for the new economy, through upskilling and cross-skilling, in a fair and effective way. Targeting locations where there is the greatest need could help in planning and developing the next generation of training facilities and outreach programmes from universities.

Maximising benefits of innovation: The Government must clarify how it sees research and innovation delivering supply chain diversification, and hence domestic job content. Clusters of test and demonstration sites that build on existing capabilities and deliver supply chain diversification should be established to accelerate innovation and develop affordable, job-creating solutions, fit for design, manufacture and installation in Scotland. An updated Industrial Strategy for Scotland should ensure clarity on this.

Enabling delivery: Staffing levels need to be adequate for the delivery of low carbon projects that involve meaningful participation of communities, speedy resolution of issues, and the acceleration of planning processes. Dedicated energy development officers within government and local authorities could help address engagement and development while increasing the speed of delivery and maximising benefits.

Effective planning: The Government needs to provide clarity on the utilisation of land and sea and establish clear processes to resolve any conflicts that may arise. Local government needs sufficient resources to implement and accelerate planning processes.

Tackling fuel poverty: Action on energy efficiency is urgently needed. For low-income households to switch from fossil fuels to clean energy requires both supply and demand measures – addressing pricing barriers for renewable sources, and reducing energy consumption through increased efficiency. Affordable clean energy must be available to all, and government needs to consider how community-led clean energy solutions can build resilience and distribute wealth into the areas that need it most.

Recommendations

• an Energy Roadmap to Net Zero, with an associated Investment Plan, should be embedded within the Energy Strategy and Just Transition Plan to enable workforce planning, supply chain investment and diversification, infrastructure planning and planning at the regional level.
• a plan on the future of energy sector jobs must provide a clear picture of what the new energy economy will look like. This will help identify future opportunities, what skills will be prized, and where jobs will be located
• the Energy Strategy and Just Transition Plan should identify actions to test and deploy innovative solutions that make the transition more affordable. Clusters of test and demonstration sites that build on existing capabilities and deliver supply chain diversification should be established to accelerate innovation, and develop affordable solutions fit for design, manufacture and installation in Scotland
• the current transmission charging scheme militates against investment in Scottish solutions and inflates costs for Scottish communities. It needs urgent reform. The Scottish Government should bring the full weight of its influence to bear on this matter, which remains reserved to Westminster

I will look forward to further productive exchange on these and other issues over the coming months.

Sincerely,

Professor Jim Skea

Chair, Just Transition Commission

Annex A - meeting readout

Just Transition Commission meeting, October 11-12, 2022, Isle of Lewis

Purpose

This paper gives an overview of key themes, insights and data points from the Commission’s October 2022 meeting in and around Stornoway. It is intended to provide Commissioners with a reference point to support further deliberation, engagement, analysis and reporting. Reflections made in closed sessions are included within the relevant section. Any follow-up queries for particular organisations/speakers can be facilitated via the Secretariat.

Tuesday 11 October

Intro session

• agreement that whereas clarifications should be issued in the case of glaring factual inaccuracies, other proposed “improvements” to Commission reporting will not be considered
• importance of clear lines of sight across working groups was underscored in order to support collective ownership of all Commission outputs

Information-gathering session I

Venue: Tighean Innse Gall (a housing and energy agency for the Western Isles)

Themes: Fuel poverty; domestic decarbonisation in remote island context

• c.80 percent of Isle of Lewis households now living in fuel poverty; very high rates of extreme fuel poverty
• 54% Western Isles households use oil boilers; 36% electric; 8% gas central heating – TIG advocate a phased approach to moves away from fossil fuels in this context
• low quality housing stock – frequently large, under-occupied, detached, exposed -- is difficult to insulate, particularly to new standards
• closure of TIG’s Insulation Service (June 2022; 14 redundancies) was attributed to new PAS 2035 standards attached to ECO and SG funding and HEEPS: ABS funding, which TIG had delivered on behalf of Comhairle nan Eilean Siar (LA)
• specific difficulties in adapting to new standards were: additional front-end surveying time, difficulty accessing and retaining requisite skills, suppliers and contractors; access and speed of supply chain accreditation – all challenges heightened by the area’s remote rural island setting.
• retraining requirements hard to incentivise given buoyant commercial construction market
• significant measures required to create the workforce required for retrofit and energy efficiency measures at scale, and these will need to take account of specific place-based challenges, particularly for rural /remote/ island communities
• question: is the distinction between standards and regulations a meaningful one for strategy of organisations such as TIG? What are the potential risks/benefits of non-compliance given place-based challenges?
• question: can financial benefit from community wind be applied directly to domestic energy efficiency and retrofit measures?
• paradox that whereas Western Isles is highly productive in terms of power generation, local consumers face very high costs due to existing grid arrangements
• consideration of the effectiveness or otherwise of “island-proofing” efforts on decarbonisation policy, given the specific place-based needs of a community such as that served by TIG
• pitfalls of “one-size-fits-all” decarbonisation policymaking; Islands Assessments not as strong and robust as communities had hoped
• importance of the Islands Act being applied consistently and meaningfully; “island-proofing” can’t stand in place of bespoke place-based policymaking
• need for detailed engagement and consultation to inform policy and avoid unintended negative consequences
• business as usual is locking us out of Net Zero
• need for new standards to be accompanied by local certification and training programs; need to identify groups requiring additional support in early phase of rollouts

Information-gathering session II

Venue: Comhairle nan Eilean Siar (Western Isles local authority)

Theme: Local authority decarbonisation and economic development plans

• 600MW Transmission Link scheduled for 2027 has been dropped in favour of 1.8GW Arnish-Beauly link by 2030 (delivery uncertain)
• currently no export connection for commercial onshore wind
• 21.5MW community-owned generation connected to Distribution (constrained)
• approx 410MW commercial onshore wind consented and contracted to Grid
• Scotwind N3 and N4 (1.335GW) and Lewis Onshore Wind (420MW) could now all be routed through Lewis – CnES argues landfall in the islands critical for securing transformational community benefit
• proposal for green hydrogen development at Net Zero Hub, Arnish (recipient of SG Green Growth Accelerator funding; estimate 600-650 jobs at potential peak) – converts “donated” renewable electricity supply into green hydrogen via electrolysis; conversion of Stornoway Town Centre Network 2027-2029; from 2030 to be commercially self-sustaining and include conversion to green ammonia (ship fuel)
• “back to front” electricity network presents key challenge – “the best renewable energy resource in Europe but delivery to market almost impossible”
• CnES stresses 1.8GW link is vital to maximising benefit
• opportunity to repatriate Oil and Gas workers; reskilled for renewables
• need for school and higher education courses to build local employment pipeline – CnES is working with HIE, Skills Development Scotland on this
• opportunity for community production of green hydrogen for community use (including elimination of fuel poverty and domestic decarbonisation) and export
• downsides of hydrogen and ammonia (safety, storage, etc) were noted – pilot scheme in Fife highlighted as critical for hydrogen development for home use
• potential opportunities for MoU with Scotwind developer to contribute to local energy efficiency

Theme: Outer Hebrides transportation

• limited attention to island active travel needs; funding for active travel disproportionately benefitting urban areas
• national concessionary fare scheme should include ferries and currently has in-built unfairness against rural areas due to usage patterns
• view that more funding is available for urban than rural areas (is this disproportionate?)
• council anticipates extreme difficulty maintaining annual payment to Loganair (£600k p.a.) to support patient and health board workers travel
• advocates purchase of 4 additional ferries
• high emission LNG seen as impractical for CalMac use – potential for hydrogen ferries?
• transport delays and cancellations (CalMac, Loganair) poses major threat to local business and economy, e.g. shellfish; also worsens depopulation
• significant risk to industrial base given net zero infrastructure dependent on transport links
• strong suggestion CalMac should be headquartered in Western Isles to ensure local needs understood and bring high quality jobs to the area
• concerns re potential negative impacts of Loganair sale

Meeting with Minister for Just Transition, Fair Work and Employment

• minister undertook to respond formally to the Commission’s July report in advance of the publication of the draft Energy Strategy and Just Transition Plan in early December
• minister intends to accept most of the report’s recommendations, however noted that some issues particularly challenging given nature of devolved competencies
• commission in agreement that there is no expectation all recommendations would be implemented in full; stressed value of clarity regarding reasons for those that will not be acted upon
• commissioners were keen to know how the Minister viewed the interim report; Mr Lochhead noted the complexity of the report and the recommendations and that there were a number of recommendations that still needed consideration from officials
• commissioners asked the Minister how the cross-portfolio recommendations would be delivered if accepted – Mr Lochhead answered by underlining the importance of JT in all Cabinet Secretary / Ministerial portfolio, reflected in bilateral meetings, saying that just transition is being built in to other areas proactively
• another important question from commissioners was related to place-based or regional / local approaches to the transition, specifically whether SG would adopt other place-based strategies or regional just transition plans outwith Moray and the North East and Grangemouth. Mr Lochhead said that whilst sectoral just transition plans are a priority, SG has been considering how best to harness local / regional just transition momentum and that more thought is needed from officials as well as engagement with COSLA on how best to start thinking about regional plans. The Minister highlighted to the Commission that SG was mindful that a transition must work for all areas in Scotland rather than “a few favourites.”
• commissioners were concerned that fringe meetings on just transition for example at SNP party conference were being held without adequate representation of unions and other key stakeholders – with concerns that this could lead to a less inclusive transition. In other international jurisdictions there are concerns that the true definition of just transition is being diluted
• commissioners were concerned about viability of just transition and net zero targets due to budget / resourcing issues across government (e.g. money diverted from ScotWind for cost of living funds). Mr Lochhead reassured the JTC that money would be refunded.
• monitoring and Evaluation was also a key concern. Commission wished to know how SG was monitoring impacts of decisions taken by other areas of government related to the transition
• skills was another theme and questions were asked about workforce development – and how the Scottish Government would approach the skills issue, including by linking sectoral plans to a workforce development plan as well as to new innovative technologies: “make Scotland fit to manufacture and design the next generation of energy tech”. Mr Lochhead assured commissioners that skills challenge (and fair work considerations) is at the heart of SG just transition approach
• commissioners asked specifically which recommendations in the interim report were challenging to the Scottish Government – the Minister highlighted recommendations relating to the energy market, i.e. transmission charging issues, as well as social infrastructure recommendations, citing complexity of recommendations and budget constraints
• commissioners highlighted need to address reform to rural support scheme and the importance of providing support early on to agricultural sector in Land Use and Agriculture JTP
• commissioners pressed Mr Lochhead on the need for clarity for industry in the near future – for example clarification on where innovation / manufacturing hubs will be – also being critical that the JTC and ESJTP so far how been disconnected, asking for more involvement in the consultation of the plan
• commissioners were also keen to know if SG has been considering transition plans for other sectors – i.e. fishing / marine. Mr Lochhead noted that they are on the radar
• minister noted that SG values JTC experience and expertise especially on key issues like energy (i.e. how can surplus energy benefit communities?)
• agreement that Commission can also add value by focusing on longer-term challenges and horizon-scanning
• fuel poverty was another key issue, including the need to steer public / private finance to ease the strain of cost of living and energy crisis. Mr Lochhead noted that JTC guidance on this issue would be welcomed
• commissioners raised issue of energy wholesale pricing and benefits of localising energy production, storage and pricing
• example of Spanish solar energy raised, since it is exported without entering European pricing mechanism
• agreement that Minister to meet Commission periodically and find explore involvement of other Cabinet Secretaries for relevant portfolios

Venue: Stornoway Town Hall

Themes: Energy, Land Use and Agriculture, Heat and Buildings

Format: Public event / “world café”

• recurring frustration that community energy generation cannot be used directly to meet needs of local people in fuel poverty free of charge; paradox of vast renewable resource sitting alongside profound and widespread fuel poverty; need for legislation/regulation/infrastructure to rationalise connection between local generation and domestic usage
• views that community energy generation should be considerably expanded
• key question: how to achieve equitable community benefit from local renewable energy production
• difficulties for remote communities in accessing retrofit (key for air source heating to be effective); central belt seen as privileged in this regard
• lack of local skills in retrofit (and courses/pipeline/apprenticeships) highlighted as constraint on growth; huge jobs potential in retrofit but requires strategy and major investment
• fears islands may be taken advantage of with large scale commercial renewables development – lack of jobs in wind generation; highlighted risk of young people leaving Western Isles for graduate opportunities
• some limitations on local renewables development due to historic environment (Callanish)
• risk of energy price rises to local businesses as well as households

Wednesday 12 October

Information-gathering session III

Venue: Point and Sandwick Trust (windfarm;HQ at Knock)

Theme: Community Energy

• extensive discussion of benefits of community power; identification of “credibility gap” as major blocker within public and private sector if Scotland is to unlock finance and maximise potential upside of community energy development; argument that community energy needs to be on SG agenda as a key strategic priority for just transition delivery
• government vision required to support communities to develop projects by providing risk finance as key enabler
• Calum McDonald: “Community power doesn’t just need to mean small and cuddly… it can mean big and cuddly”
• Point and Sandwick Power generates 9MW, enough to supply electricity to all 10,000 households on islands of Lewis and Harris
• planning began 2005; £14 million debt finance for construction; £2.5-4M gross turnover p.a.; £1M average net income p.a. after financing, ops and maintenance; all net income gift-aided to PS Trust; 1 FTE staff member on power side; overall economic impact has created 32 FTE and 25 PT jobs
• site is crofting, common grazings land, leased from owner
• currently community wind is just 1% of Scottish onshore wind. Comparison with Denmark (over 50% onshore wind is community wind); question posed what are governance structures in Danish community wind
• community vs Corporate? Does this map onto onshore/offshore based on offshore risk? Is this a good strategic direction?
• what are the targets for percentage of windfarms that could be community wind; onshore particularly highlighted; opportunity for major expansion including/especially on Forestry and Land Commission land – “none of it is community owned; all of it should be”
• all leases renewed over next 5-20 years: “a huge opportunity to replace corporate with community and public ownership”
• need for a public body to support and drive forward development of community energy sector
• ambition for local communities to supply marine sector (including CalMac) with hydrogen (Point and Sandwick Trust published 2019 report on this)
• development underway on community-owned 25MW battery
• emphasis on multiplier effect of community ownership on local benefit. Current SG recommendation is £5k per MWh as target for private windfarm community benefit (approx. £15k per turbine); contrast with PST as community example – averages £100k pa per MW profit (£300k pa per turbine; £900k pa for just 3 turbines compared to corporate owned £90k pa for 6 turbines)
• possible route to deliver sizeable community benefit no longer achievable via wind supply chain
• pinpointed key disconnect between local authority economic decarb and development plans and community energy – no community energy representatives on local authority hydrogen working group, for example
• M&E – there should be targets for good outcomes on community energy, as well as retrofit (and finance gap on both)

Information-gathering session IV

Themes: Adaptation; Community Land; Crofting; Peatland Restoration

Venue: Point and Sandwick Trust; Loch Orasay

• NatureScot convened working group including key stakeholders to work towards identifying and meeting adaptation requirements for Western Isles (response to climate emergency declaration); Adaptation Scotland recognised as invaluable in setup of partnership
• South Uist at highest risk to sea level rises; storm surges have recently caused loss of life
• coastal resource adaptation is best form of defence for the islands; holistic approach required that considers challenge in the round – e.g. value of seaweed as “offshore” tidal defence vs commercial harvesting
• question of how to finance adaptation measures given fundamentally about preventing future costs not short term profits
• Western Isles is 60% community owned; 75% of the population lives on community land; ‘green lairds’ not as prevalent as mainland; region has radical history of “land raids” (forcible seizure from landowners) dating back 100+ years
• challenge of large numbers of second homes/holiday lets, benefits of schemes to incentivise permanent residency in order to build community and local economy
• benefits of crofting: maintain local population, grow high quality food, protection of wildlife, habitats and biodiversity; active land management presence; carbon management; coastal defences; broaden access to land; can now include husbandry of broadleaf forestry
• risk of crofters disengaging from policy discourse on decarbonisation because of perception of being “blamed” for emissions without recognition of positive contributions to meeting net zero
• re Agriculture Bill: need to recognise principle of peripherality and natural constraints; stark difference in viability of business in remote island context
• possibility of extending model of land use/ownership beyond highlands and islands, particularly via ‘woodland crofts’
• Peatland restoration at Loch Orasay part of broader effort to turn degraded peatlands from carbon sources to carbon sinks; 50-80% of Scotland’s peat is degraded
• requires sustained co-operation between Peatland Action, Scottish water, local grazing committees
• local civil engineering firms contracted for peatland restoration works