Alistair McGirr and Tristan Zipfel gave evidence.

The Committee will now hear oral evidence from Alistair McGirr, group head of policy and advocacy at SSE, and Tristan Zipfel, director of strategy at EDF Renewables. We have until 2.30 pm for this session. Will you be kind enough to introduce yourselves for the record, gentlemen?

Alistair McGirr:

I am Alistair McGirr. I look after our cross-cutting policy and public affairs. I sit within our group structure, but SSE has interests across renewable energy, flexible capacity and electricity networks.

Tristan Zipfel:

I am Tristan Zipfel, director of strategy, markets and investments for EDF Renewables. We are one of the leading renewable energy developers in the UK. We have about 1.5 GW in operation, with 600 people across the country in five different offices. It is a real pleasure to be able to share some evidence today.

Mr Zipfel, one of the disadvantages of having a geriatric Chairman is that my hearing is not as good as it used to be. But for everybody’s benefit and, most particularly, for the Hansard reporters, it might be helpful for you to speak up a little and be very clearly on microphone. I call the shadow Minister.

Good afternoon, gentlemen, and thank you for taking the time to be with us today. Clause 3 of the Bill, titled “Objects”, states that GBE’sQ50

“objects are restricted to facilitating…the production, distribution, storage and supply of clean energy” and must include

“measures for ensuring the security of the supply of energy.”

SSE and EDF Renewables are involved in both those objects right now, so how do you see the Bill and the creation of this company as either assisting or facilitating you in your objectives?

Alistair McGirr:

At SSE, we welcome GB Energy, and as a company that is headquartered in Scotland, we particularly welcome its location. We think that Scotland has a larger opportunity for investment across the clean energy transition. To answer your question directly, it depends on how the organisation is set up and on its governance, but if, as has been suggested, GB Energy will be focused on crowding in investment, there is an opportunity for it to help to accelerate that transition and, importantly, to capture some of the wider opportunities that can come from the transition.

Tristan Zipfel:

You can probably tell from my accent that I come from a country where state-owned investment in energy assets is commonplace, so that is something that we at EDF are very comfortable with and see very positively. In fact, I would say that any initiative that leads to directing more investment, capital and effort into decarbonisation is a very good thing. As Alistair said, it will be important that GB Energy is set up in a way that triggers and supports investment in the sector and does not disrupt the competitive playing field that we currently have in it.

Q Thank you for those clear answers. It says under “Strategic priorities and plans”, which is clause 5 of the Bill:

“The Secretary of State must prepare a statement of strategic priorities for Great British Energy.”

If you were the Secretary of State and were tasked with drawing up strategic priorities, what would they be?

Alistair McGirr:

On the way that we think about the particular benefits from GB Energy, first, we look at it as a potential partner for some of our investments. We work with a number of commercial entities, some of which are state owned—for example, Equinor, which we work with on the Dogger Bank offshore wind farm and on our carbon capture and storage projects. We work with these parties on a commercial basis and we would be open to working with GB Energy on projects that would help to accelerate the transition. So co-investment is one area. We would be keen to see that targeted at areas where there may be a bit of policy risk. With things like hydrogen storage, hydro-pump storage or CCS, there may be an opportunity for GB Energy to take some of the policy risks that private companies perhaps cannot.

Offshore wind is an area where there has been lots of debates, and there was some nervousness relating to the initial discussion about the Crown Estate tie-up. However, we think that with the principle they were trying to achieve, which is the acceleration of that environmental consenting process, there is an opportunity to accelerate projects and, importantly, reduce the cost of bringing those projects to fruition.

To give an example, our Berwick Bank offshore wind farm up in Scotland, which is one of the largest in the world, is currently sitting within the planning process and has been for 20-plus months now. Projects like Berwick Bank could be accelerated by a focus on areas where GB Energy can accelerate environmental consenting, basically by taking a more strategic approach to how it thinks about environmental consenting rather than considering that on a project-by-project basis.

To make a point on offshore wind, the one area that everyone will talk about—I am sure we will come back to it—is floating offshore wind. There is a big opportunity for not only GB Energy, but the national wealth fund to capture a whole range of benefits from the emerging sector, in terms of both bringing the costs of delivery down and making sure that there is a supply chain available to deliver the projects that are currently under development.

Perhaps a last point to mention is the local power plan. We would be quite keen, as an operator of electricity distribution networks, that the local power plan was able to be targeted in areas where there is a wider system and societal benefit in supporting and unlocking a lot of the low-carbon projects in the distribution network, because it is no secret that there will be lots of questions about how things connect to that local distribution network. We think that the local power plan has a particular route in targeting some of those investments in a way that can better integrate low-carbon technologies into the distribution network.

Tristan Zipfel:

To add to what Alistair said, for a start, the UK is in a really strong position to maintain its leadership in the renewables market. There is a strong industry in place, and I think GB Energy can fit into that and strengthen the framework. As a co-investor, in particular, I think GB Energy could bring value, as Alistair said, by investing in frontier technologies, but also by helping to strengthen the link and connection with local communities. For our projects to be successful, it is absolutely paramount that they are adhered to by the local communities. As a developer, we spend tremendous efforts on being present and creating a connection with local communities. Having GB Energy on board for certain projects could reinforce that link and even provide a sense of public ownership in the project, which I think would be very strong.

Alistair talked about emerging technologies and how some of them present certain risk profiles, where having an investor like GB Energy could help kick-start the development of this segment of the market. He mentioned CCS; I think we could talk about hydrogen as another example.

GB Energy also has an interesting role to play as a developer. We have seen the announcement of the partnership with the Crown Estate on the offshore site. There is an opportunity for GB Energy to focus on the segments of the market where the private sector is struggling to make progress, perhaps because the infrastructure is not yet there, or because there are specific risk profiles that make the private sector struggle to invest in these segments of the market, despite them presenting long-term value. That is where there is a real opportunity for GB Energy.

Q I will be brief, because I know that others want to come in. Mr McGirr, you specifically mentioned Berwick Bank and planning and consenting. Obviously, Berwick Bank is in Scotland, and planning and consenting is a devolved competence. Clause 5(4) states:

“The Secretary of State must consult the Scottish Ministers before including in a statement under this section anything which concerns a subject matter provision about which would be within the legislative competence of the Scottish Parliament”.

As a company that has heavily invested in Scotland, did you realise that there was detail in the Bill about how GB Energy will interact with the devolved Administrations, given that so many aspects of what it is seeking to achieve are competences of the devolved Administrations, specifically in Scotland?

Alistair McGirr:

In terms of the premise, I definitely agree that the devolved Administrations have to play an important role in the direction of GB Energy. I do not think there necessarily needs to be anything in the legislation. I suppose it is also worth mentioning that there might be a view about how the investments are spread across different parts of the country. In reality, a lot of those will be up in Scotland because of the opportunities that Scotland has.

I have three Members on my list already, and we have 15 minutes left, so please be short, sharp and to the point.

I will keep it short. Thank you both for your insights today. I would like to know what advantages other European countries have from a state-owned energy companyQ .

Tristan Zipfel:

If you take the example of France, EDF is indeed state owned, but it is a competitive market. Nowadays, EDF is one actor among others. If you take, for instance, offshore wind in France, EDF competes—sometimes it wins, and sometimes it does not. The benefit for the general public is a sense that that body can execute the strategic vision of the French Government in delivering net zero or a decarbonised future. EDF is very much the arm that executes that vision—independently, at arm’s length, but it does it. I also think there is a creation of long-term value by the ownership of assets. EDF provides dividends to the French state, which I think are valuable.

Merci.

Alistair McGirr:

If I may add to that, there is the question of the role of the state. Not everything has to be through GB Energy or the national wealth fund. In terms of the GB Energy policy framework, the creation of the National Energy System Operator can help to drive a lot of economic value through the transition here in GB by taking a much more strategic approach to how infrastructure is going to be deployed. GB Energy is one element of that, but I think the wider value can be brought together by a more strategic approach through the policy framework.

You talked about the objects within the scope of the law, about facilitating and encouraging, and about frontier innovation in technology and energy generation, but you also talked about de-risking. You did not mention onshore wind, so I am wondering whether that would lead also to onshore wind. There are also tidal programmes, such as the reef from Aberthaw to Minehead, that are stalled. Do you see these as part of helping to facilitate and de-risk within the scope of GB Energy, tooQ ?

Tristan Zipfel:

For sure, yes, they could be part of the scope. Choices will need to be made, of course, on where those investments are directed, and I think it is important to direct the investments where they will have the maximum impact. When it comes to onshore wind, for instance, perhaps it could be a case not of investing where the private sector is already doing a good job on its own, but of looking at areas where there is a need to develop infrastructure to unlock these onshore wind opportunities, or of looking at Government-owned land that could be used to develop new projects. As you said, Alistair, it is going to be complementary to what the private sector is doing, but there will be pockets of opportunities for GB Energy to really make a difference, even in an area like onshore wind, I think—100%.

Alistair McGirr:

I agree with that answer. The question would then be: where is the biggest bang for the buck? Is it building large onshore wind projects that actually have developers in that space and have a route to market? That is probably the question for GB Energy: is that the best use of taxpayers’ money, rather than other things that can be done in terms of investment in frontier technologies?

You mentioned tidal. There is the question there of an absence of a business model. If there was this supported business model, there might be an opportunity for private investors to come into that space. There is the issue that just because the private sector is not doing it does not mean that the public sector should do it, because ultimately, if it is a bad deal for private shareholders, it is probably a bad deal for taxpayers as well. I think this is about making sure that the technologies that are useful are brought forward with business models that provide a return for whoever the investor is.

Welcome, gentlemen. In relation to clause 3(2)(a) andQ

“the production, distribution, storage and supply of clean energy”,

you have welcomed state intervention and the role of GB Energy in that. How would you feel about communities taking a direct stake in your onshore and offshore developments—say, 20%, as they do in Denmark?

Tristan Zipfel:

On our side—I am sure SSE does the same—we are definitely looking at that. We are trying to develop some schemes that go exactly along those lines. We have not done it so far. The link and the reward to communities have been through the community benefits fund linked to our projects. I live in Teesside: we have an offshore wind farm there, and I can tell you that the community benefit fund, over the last 10 years of operation, has helped dozens of local projects and initiatives. You are absolutely right to think the next frontier is to have more local ownership of wind farms. That could be through GB Energy, but it could also be through direct ownership schemes. We are looking at those options at the moment.

Alistair McGirr:

As I mentioned at the start, we partner with a number of different organisations; I mentioned Equinor, which is a state-owned entity. We are open to working with any kind of party on a commercial basis, be it a community or another developer. In that sense, the communities taking a stake in some of the projects is something that could be done. The question is: what are the terms of that arrangement? There is the critical point that any community ownership should be focused on co-investment. It should not just be the case that 20% of a project is passed on to a community, because that will be value that is basically taken out of the project, which then inflates the cost of the project. So the co-investment piece is very important. Whether it involves another developer, another state-owned entity, GB Energy or a community, I think that is a useful way of bringing capital into the UK’s low-carbon infrastructure.

Thank you for answering our questions. In the morning sitting we struggled with the fact that although we all hope the Bill will do something, it has relatively little detail. We have already discussed the merits of not having too much detail, because then GB Energy would be hampered, Q and of having more detail. We have to try to find a balance in what we agree to in legislation. When you look at clause 4, are you content with the scope of the financial assistance provisions?

Alistair McGirr:

Yes, frankly. I think there will be other protections in place—what was in old money called state aid protections but is now subsidy control. There will be wider provisions that ensure that GB Energy does not have adverse impacts on investment into the competitor space, be they state aid provisions or subsidy control provisions. That will ensure that what GB Energy is effectively legislated to be able to do does not adversely impact a competitive playing field. It is important to make sure that that is maintained. Ultimately, if there is a tilting of the playing field towards GB Energy, that will be a bad deal for either the taxpayer or the consumer.

Tristan Zipfel:

I concur with what was said. It is really important that the establishment of GB Energy does not disrupt the dozens of billions of pounds that are going to be directed by the private sector into the renewables sector, or the clean energy sector in general, over the next decades. For that it is important to maintain trust in the fact that it is indeed going to be a level playing field and that GB Energy is not going to benefit from forms of assistance that would disrupt competition. That being said, I think GB Energy will have its own criteria, strategy and approach, which is absolutely fine. But it needs to be in the context of a level playing field from a competitive standpoint. That is really important.

I welcome both witnesses to the Committee. Clause 5(5) states that the Secretary of State will consult Welsh, Scottish and Northern Ireland Ministers, so as a Welsh MP I am content—it sounds like you are, too—that our devolved Administrations will be consulted before things happen. I think it was Mr McGirr who said there were bound to be lots of projects in Scotland. I want to flag the fact that Wales is also extremely well placed to receive some of these projects in terms of hydro, tidal and wind energy. What in the Bill would help us to ensure that lots of the investment comes to Wales?Q

Alistair McGirr:

I am very supportive of those projects coming to Wales. Obviously the Celtic sea auctions are another example of the upcoming opportunities in Wales. The reality is that GB Energy is not going to be the vehicle that drives that—that will be the wider policy framework in terms of what happens here in Westminster, and also in the regulatory frameworks that are in place and what happens in the devolved Administrations. My reference to Scotland is not to say that other parts of the country could not have the opportunities for investment. It is just that the sheer scale of the opportunities in Scotland for wind, hydro, some of the grid projects, CCS and hydrogen mean there is a significant opportunity in Scotland. That is one of the reasons why GB Energy has been located up in that area.

Tristan Zipfel:

I can only concur. Wales is very important for us. We have onshore wind projects that we are actively promoting in Wales. I think GB Energy could play a role there. I want to emphasise, however, that I do not think GB Energy on its own will be the solution to unlocking the opportunities you describe. I think it is really important in Wales in particular that there is an effort on the policy side to provide more certainty and more visibility of the projects, as well as the question of the grid, which is a problem. But I concur that Wales is very important strategically from our standpoint as a renewable energy developer.

Thank you for coming in, gents; it is always nice to hear positive things about Scotland.Q

In relation to some of the objects that are detailed in clause 3, I think we are all excited about the potential for the state to take a proactive role in the production of energy, but the Bill is quite clear that it is about

“the production, distribution, storage and supply of clean energy…the reduction of greenhouse gas emissions…improvements in energy efficiency, and…measures for ensuring the security of the supply of energy.”

SSE is investing £40 billion in clean tech over the next 10 years, and EDF is investing £50 billion or so. How far do you think £1.6 billion can go, in real terms, given the breadth of the different things the Bill seeks to achieve?

Alistair McGirr:

In reality, it is not going to be the sole investor that is going to deliver the clean energy transition. As you allude to, we have a significant investment programme that we would be keen to bring to fruition over the next 10 years or so. It is about how you best use the money that is available. Where can we accelerate the investment and crowd in the scale of investment that is going to be required? We may be talking about big numbers, and in EDF as well—not only here in the UK but elsewhere—but there will not be just one investor. If you look at the National Infrastructure Commission, for instance, they are projecting in the region of £25 billion to £30 billion of investment in energy infrastructure per year for the next decade. The scale of the investment is going to be much bigger than any single entity, be it GB Energy, SSE or EDF.

Tristan Zipfel:

Choices will need to be made—you cannot do everything with that pot of money—and it is really about identifying the areas where they will have maximum impact and where they will be most complementary to the effort of the private sector. It is not about displacing the private sector; it is more about covering the gaps and providing a boost to more investment in the sector.

That is also the spirit of the agreement with the Crown Estate. Looking at offshore wind, what is currently the blocker for more investment? It is the timeframe that it takes to develop a project. The spirit of that agreement is to look at an early stage and make it easier for private investors to invest in projects that are more de-risked than they are at the moment. That is the right approach, in my view, and it could be expanded to the other technologies in the scope of GB Energy.

We have a couple of minutes left.

Gentlemen, in relation to clause 3(2)(a), on the supply of clean energy, you have mentioned floating offshore wind, onshore wind and tidal; what do you think are the benefits of GB Energy for technologies such as solar, which is quite well advanced, and geothermalQ , which is quite important to us in Cornwall? There will be no requirement to consult a Cornish Minister about that.

Tristan Zipfel:

I can start with solar energy. As a business we do not look at geothermal, so I do not want to elaborate on that, but we invest a lot in solar. When you look at solar, the issue is not to get private capital—there is more than enough capital to invest in this. However, where GB could provide value is perhaps in creating that link with local communities. I keep going back to that, but it is so important for us to create a sense that those projects are not just there for private investors but have an element of state and public ownership. That could mean a lot for local communities. In partnership with GB Energy, we could even imagine GB Energy taking the lead on the relationship with local communities or in certain parts of the development that are so essential to the project. Recent studies have shown that local communities would respond very favourably to projects in which Great British Energy is an investor alongside the private sector. In that sense, it would make a difference.

Alistair McGirr:

I think the local power plan is an opportunity for these technologies. It is not just about the big, mature technologies. It will play an important role in developing projects in solar and geothermal in Cornwall, in Wales and in other parts of the country, too. It is about making the most of the local power plan and working with developers to help to bring those to fruition as soon as possible.

Thank you. I apologise to Members who have not managed to ask all the questions they want to ask, but we are out of time on this panel. Mr Zipfel and Mr McGirr, I thank you very much on behalf of the Committee and the House for affording us the benefit of your opinions and your time.