Building a low-carbon Scotland

The CBI organised a sequence of round tables to discuss Scotland’s priorities for decarbonisation. These discussions took place during the same week as the Prime Minister’s announcement that the UK would adopt a new net-zero target for greenhouse gas emissions by 2050, making these events extremely timely. Meanwhile, Scotland is currently legislating for its own 2045 net-zero target, achievable because of Scotland’s renewable energy resources and potential for carbon capture technologies.

We aligned the round tables to the three campaign strands of the CBI Powering the UK’s low-carbon future campaign, which cover power, transport, heat and energy efficiency. The aim was to inform the CBI’s policy positions across these crucial areas, with a particular focus on recommendations that the CBI will make for decarbonisation priorities during the 2020s in a report later this year. The round tables included representatives from the UK and Scottish governments and Scotland’s Just Transition Commission, which provided an important engagement opportunity for those members present. The summary of the discussions that follows captures some of the conversations had.

Participants agreed that important progress was being made on power decarbonisation, and in Scotland in particular, where renewables generate enough electricity for 70% of Scotland’s demand. The investment framework created by Contracts for Difference (CfDs) is a model that must be maintained, having demonstrated how it can drive down the costs of offshore wind in competitive auctions. But the political block on onshore wind from Westminster is hampering progress, and means decarbonising and achieving net-zero will cost consumers more. Even with renewables reaching cost-parity with fossil fuels, the certainty for investors provided for by CfDs will support continued deployment goals, such as the government’s 30GW offshore wind deployment target. Debate was had about the potential for reforms to CfDs, and the need for certainty and vision from the government’s forthcoming Energy White Paper.

The move to low-emission transport options featured in all three discussions. For the power sector, electric vehicles offer a potential solution to energy storage with the possibilities of mass vehicle to grid-charging, while in the shorter-term, new time of use tariffs can help ensure vehicles are charged at times of low-demand, helping to regulate power demand. But delivering these benefits require significant levels of data, and the transport roundtable identified the open-source data availability in London via Transport for London as a model that could be adopted in Scotland to promote different sectors working together to get the best out of technology. Scotland’s geography and population size were identified as strengths, as they are well suited for trials of new technologies, particularly for transport and heating. Scotland’s major cities are the right scale to potentially host large-scale demonstrations of district heating, for example.

A repeating theme was the idea of ‘energy as a service’. Energy companies are increasingly moving to provide a range of energy services, rather than just power supply, and this has positive implications for consumers with new integrated low-carbon transport and heat products in the future.

Concerns were raised repeatedly about the interaction between different government departments, and varying levels of prioritisation given to decarbonisation. This priority should also be reflected in regulation, it was argued, with several discussions about the priorities that government Ofgem’s decision making. There was general agreement that making decarbonisation a priority for Ofgem would support improved decision making and help remove existing regulatory barriers, such as those hampering the roll-out of domestic and grid-scale battery storage.

All of the roundtables concluded with a discussion about “who pays” for the transition. Much of the UK’s decarbonisation to date has been supported by policy costs added to consumer energy bills. Participants said that while business is ready to make significant investment without much government support, such as in electric vehicle recharging infrastructure, there needs to be a fair balance in the sharing of costs. Spending from taxation must also be used to ensure that the most vulnerable in society, and business facing a competitive disadvantage, can be supported during this transition. Scotland already has a ‘Just Transition Commission’ in place, considering these issues. With more policy costs falling on electricity and gas, there is currently a distortion that will hamper the move to low-carbon heating solutions, which will need to be addressed.

This is particularly important for energy efficiency, where necessary improvements, both in homes and businesses, significant investment is needed. Participants reported that progress in Scotland on domestic energy efficiency is outpacing the rest of the UK, but more action is needed for business energy efficiency. Passing these costs on to electricity bills was not seen as ideal, given current policy costs, so another option should be found, such as better financing options and direct government funding in some cases.

The CBI’s support for a UK-wide net-zero was welcomed by members at these discussions. The ambition is the right level, but the challenge now is to create the policies and sector-specific pathways to achieve this. Scotland is well placed to lead this ambition, reflected in its 2045 net-zero target. But ultimately, policy decided in Westminster will shape whether Scotland can make the most of its natural resources and support the whole of the UK’s transition to a decarbonised economy.