Gwelch i'r 11 o'r gweithio gyda'r Gweithreitol, Fenergiol a Llywodraeth Cymru.  That is whether we have to consider whether to take item 6 and 7 in private. Item 6 is the consideration of evidence that we will hear today as part of our inquiry into Scotland's electricity infrastructure, inhibitor or enabler of our energy ambitions. Item 7 is consideration of evidence that we will hear today in relation to Scotland's deposit return scheme. Are we agreed to take those items in private? We are agreed. Our next item, gender item 2, is consideration of a consent notification on the reach amendment regulations 2023. This is a UK statutory instrument where the UK Government is seeking the Scottish Government's consent to legislate in areas of devolved competence. The committee's role is to decide whether it agrees with the Scottish Government's proposal to consent to the UK Government making these regulations within devolved competence and in the manner that the UK Government has indicated to the Scottish Government. At our last meeting, we considered the notification and agreed to request further information about the proposed extension to the registration date and its impact in Scotland from the relevant regulatory bodies and the UK Government. There has been additional letters received, which I believe all the committee now have. We also agreed to invite the Minister for the Environment and Land Reform to give evidence today. We have until 31 March to respond to the Scottish Government's notification, so straight after today's evidence session, we aim to come to a view today. I am pleased, therefore, to welcome Mairi McAllan, the Minister for the Environment and Land Reform. Thank you, Minister, for attending at short notice. I would also like to welcome Dan Merkel, the chemicals team leader, and Elisa Hine, the lawyer from the Scottish Government. We have about 20 to 25 minutes for this item. Before we move into questions, Minister, I believe that you would like to make a very brief opening statement. Yes, we will do, convener. Thank you very much and thanks for having me here today to discuss the proposed statutory instrument to extend registration deadlines under the transitional arrangements of UK reach regulation. The purpose of the statutory instrument is to extend by three years the dates by which manufacturers or suppliers of chemicals in Great Britain, or, as I will refer to it here and after GB, must register their substances in UK reach. Following feedback, work is currently on-going, looking at how registration arrangements may be improved in UK reach. The extension is proposed to allow this work to be completed and to give business certainty on their obligations in the meantime. By way of very brief background, UK reach regulation replaced the equivalent EU reach regulation following EU exit. UK reach applies in GB and regulates the marketing and use of the majority of chemicals on the GB market. Now the Brexit that was eventually negotiated, but hard Brexit meant that we were denied membership of the European Chemicals Agency and, as such, we have had to set up an entirely autonomous regime that essentially mirrors that of the EU. Registration under UK reach is a significant undertaking for businesses in GB, likewise for the health and safety executive, which delivers most of the technical functions of the UK reach and DEFRA as the UK reach policy lead. Those proposed extensions to the registration deadlines arise from the significant financial and practical challenges that registration poses for GB businesses. Just to put that into context, compliance with EU reach was estimated to have cost UK businesses some £500 million. The current DEFRA estimate of cost to UK business under the new regime is between £1.3 billion and £3.5 billion. As well as cost to business in Scotland, we have a large number of SMEs who are unlikely to have directly interacted with the EU reach and will have relied on others in the supply chain to do the necessary on their behalf. An extension is actually particularly important for Scottish business, their supply chains and ultimately consumers in Scotland. Concerns have been raised and potential improvements have been considered, and while that work is under way, the three-year extension is thought to be appropriate. The committee will recognise that some of the concerns that I have set out there are largely about business and costs, but it will recognise that, in my role as Minister for Environment, I need to be content about the impact of any changes on the environment. Although the proposed extensions are far from ideal, I am satisfied that there are sufficient mitigations in place such that the potential for negative consequences for the environment is low. Just by way of practical example of that, during this extended transitional phase, suppliers and users of chemicals in Great Britain will continue to follow the safeguards that are in place under the EU reach as all chemicals subject to the proposed extended deadline that are already registered under that regime. Perhaps we can get into a little bit more of that in questioning, but, in summary, I consider this situation to be far from ideal, but, as is the case for most things with EU exit, frankly, I do believe that the risks to Scottish business, consumers and the operation of the regime itself by not agreeing to this proposal is greater than the risk to the environment from consenting to it. I am happy to take questions and I will certainly bring in my colleagues too, because there are some quite technical aspects of this. Thank you very much, minister. Are the first questions going to come from the deputy convener, Fiona Hyslop. The issue of chemical registration was one of the key areas of concern when the UK left the EU. In terms of the SSI in front of us, how has the Scottish Government assessed the implications of the proposed extensions to registration and compliance checking deadlines for areas that are within devolved competence? What have you done? It is a very good question. The area of chemicals is quite a complex split of devolved and reserved issues. For example, the environment itself is being devolved, but health and safety are being reserved. We have very much worked with DEFRA and the health and safety executive who are the competent authority for these matters at UK level. Some of the points that I have reassured myself on about the impact on devolved matters are those that I was beginning to allude to in my opening remarks there. Firstly, we are only talking about chemicals. The only chemicals that are affected by the transitional arrangements are those that are already under the EU reach regime. I am comfortable that the rules there will continue to apply to them. Any new chemical or novel use will have to register straight away and will not be caught by any extension that we are proposing here. It is also about recognising that there is risk to not acting. If we have a registration process that businesses and industries are telling us that they cannot comply with in the time that they are going to have to, the risks of not acting and having a system that is unworkable is more problematic to businesses and the environment, I would suggest, than not acting. All of that has been considered. Officials have worked very closely with DEFRA and the health and safety executive who are the competent authority in all that. You have addressed the point that there are risks to delaying the approval, but in making that assessment and in the overall extension, we understand that, from SIPA, they had not been sought advice from by the Scottish Government. How did you make your assessment on that? Just to address the point on SIPA, it is obviously the regulator for environmental issues in Scotland. It will be for the environmental impact of reach overall, but the competent authority for the issue of registration is the health and safety executive. That was a decision that was made across the board with Scottish ministers, Welsh ministers and so on, so they are the equivalent of SIPA in that. Therefore, we have been working closely with them on that. Officials are keeping SIPA very closely updated with all of those developments, and they are always welcome to give us their feedback on that. I do not know whether, Dan, you might want to say more about the engagement that you have had with SIPA, but certainly they are not the official body for this. I think that the convener is saying that we need to be as short as possible. I am happy for you to come in, Dan, but I think that the ministers made it clear. Are you happy with that? Yes, I am. My final question is about the common frameworks. They are going to be key for whole aspects of the on-going EU exit. How has the common framework on chemicals and pesticide and its associated governance structures been used to support the agreements between the UK and devolved Governments on those proposals? Do you think that the common framework is functioning as anticipated? Is that an example of that, or otherwise? That is an example of that. I think that getting to that point and the cross-UK agreement that we have reached to get here is a result, and as an example of the common frameworks on chemicals and pesticides functioning. Thank you. Mark, you have got some questions. I want to ask you about some of the concerns that environmental stakeholders have and about how you have addressed those in discussions within the common framework and coming to the decisions that you have collectively. One of those concerns is about divergence within this delay period. I understand that at the moment the EU is considering the phase out and has taken the first steps towards phasing out 47 groups of chemicals under their regime. However, the UK is only considering three under the UK reach scheme in terms of that first phase of considering the environmental and health impacts of chemicals and how quickly they can be phased out. Do you see the potential here for divergence given the deadlines and the lack of pace, which the UK scheme puts in place? I would split that very briefly into two points. First, with what we are dealing with today, which is just squarely about the extension of the deadline rather than what system might replace the registration arrangements, when it comes squarely to the point about the decision for today and the extension to the deadline, I do not have much of a concern as regards divergence, because I think that we are talking here about trying to have a complete register and getting there in a timescale that is realistic. I do not see much scope for very concerning divergence between us and the EU in that regard. In fact, they are registered, I think, to 10 years to complete. If we agree to this today, I think that what we will be dealing with in UK reach will be about a similar timescale. I think that the risk of divergence comes further down the line when we are looking at what changes are going to be made to the system that this time extension is needed to look at. Officials are very much involved in the working groups looking at what might be changed to registration. We have been quite clear from the outset that we would not tolerate any diminution in standards. That is our starting point for the work with DEFRA that is just very much in the early stages. The example that I pointed out to you is a live one. 47 groups of chemicals that are going through the first phase of the process of being phased out within the EU and only three groups of chemicals within the UK system. How does the alternative model of UK reach ensure that we do not have that divergence going forward? That feels to me like a very live case of divergence that is already creeping into the system. How will the model ensure that, as we understand more about chemicals and the health environmental impacts, decisions can be made quicker to get them on the path towards being phased out? I might come to Dan if he has got anything else to offer on the specific point that you raised. For my part and for today, I am content that extending the deadline does not increase the risk of divergence. As we go in to develop changes to the registration system, my officials and I are very clear that we will not tolerate any diminution in standards and I will be very watchful for any risk of divergence there. We would want to see that mitigated as far as possible. I do not know if you know more about the specific that Mr Ruskell is talking about. I am happy to come in if that helps. You are referring to restrictions under reach, which is a separate process from registration, although registration data will be used in the restrictions process to inform those dossiers. Under UK reach, we have two projects on-going. One is this alternative transitional registration model, which is looking about fixing the problems that we are talking about here today. The other big project is called reach improvements, and that is about trying to change wider aspects of reach to make them better. Scottish Government and Welsh Government are particularly focused on restrictions under that project. We want to see better use made of decisions and work done in other countries and other regulatory regimes so that they can be fast-tracked into UK reach and hopefully save resources that can be put into specific issues around chemicals on the GB market. With the alternative registration model, the idea is that the information requirements on intrinsic properties of chemicals should not change much, but we want to see an increased emphasis on use and exposure in the GB context, which should really help to identify where there are risks that need to be controlled through, for example, restriction. I've got another couple of questions on that. I'll ask you to be brief on the basis of other committee members. I'll roll them up together. There was a decision made to not go for the preferred option that was put forward by the UK Government, which was a delay of three years, two years and one year for different categories. Instead, another option was taken to go for three years, three years and three years for all those three categories. What was the Scottish Government input into that decision? We worked with DEFRA in advance of the public consultation that they then put out, which was answered by industry, trade associations, NGOs and a broad spectrum. Although, admittedly, it was the majority of the respondents were trade and industry representatives, it was very clear that the three years extension across the board was the workable option in their view, as opposed to what the UK Government's preferred option was, which was to extend the first by three, the second by two and the latter by one. I think that, on the backdrop of that assurance that those extensions in the view of DEFRA and the view of the health and safety executive are not likely to be detrimental to the environment, I was happy that three years across the board was appropriate if that's what trade and industry believe is necessary to make this right. Again, it goes back to the point that I raised with Fiona Hyslop that the risk of not getting this right is substantial. If we need that time, then we need the time. Is there a realistic alternative open to the Scottish Government from consenting to the extension deadline for registration and compliance? What would happen if the Scottish ministers refused consent? I don't think that ultimately there is a realistic alternative. I think that we spoke about the common frameworks. Those are the ways that we have agreed to try and work together in the post-Brexit landscape. I think that so far that has worked well. One of the problems that I personally think that we have with UK reaches is that we are no longer doing it on an international basis, like what we did with EU reach, to suggest that we could do anything even more instillar within Scotland, I don't think, would be credible. I think that it's better for everyone involved that we continue to work together, continue to take advice from the health and safety executive, continue to consult. As for the bit of work that's on going just now, on what might be changed with the registration process, I'm comfortable with the fact that Scottish ministers' consent will likely be required to any of those changes and that a statement in compliance with article 1 of Reach UK will be required, which will demonstrate how it doesn't represent a difficulty for the environment. Do you want me to ask my other question now? I'm just to ask if you anticipate if there's going to be any other forthcoming amendments required for the Reach regulation. I wouldn't anticipate any further changes as to the timescales. I wouldn't anticipate a further extension, although I suppose it's not impossible, but a lot of resources currently being arranged in DEFRA, I understand, to make sure that it's done in the appropriate time. However, I expect that we will be back at some point discussing substantive changes to the registration process, because, of course, it's examining that that the extension is required for. Okay, thanks, Jackie Collette. I think that you've got some questions. Yeah, good morning minister. This question's a fairly long one, so bear with me. So we're obviously aware of other significant developments in this area, including the 2020 EU chemical strategy and the forthcoming UK chemical strategy as well. So how is the Scottish Government and the agencies engaging with these developments and what resource is committed to this? Will the forthcoming UK chemical strategy apply in Scotland in the devolved areas? Obviously, is the Scottish Government as well feeding into that strategy as well? I'll try and answer that, and if I need to hand over to my officials, I perhaps will, because I know that they will be involved with that just now. Basically, I think that the UK strategy is currently being developed. I understand that our teams are feeding into that, and that our position at this point is that we are currently withholding our approval of it, while we make sure that the final version reflects the input that we've made and is in line with Scotland's interests. I think that that's a similar position that Welsh ministers are currently making. Dan or Elsa may have more to add to that, but just briefly on the EU strategy, I think that we are keeping a watchful eye on it. Actually, I suspect that a lot of what we will be feeding into the UK strategy development will be part of learning from the EU strategy as well, of course, in line with our desire to retain pace with the EU. I don't know if there's anything to add to that. Thank you. The other thing that I wanted to ask you about was, in terms of the consultation that's being rolled out and the 20 per cent compliance checks per tonnage coming in, are you comfortable with that level? Yes, I'm comfortable with 20 per cent. I don't think that that's something that has been up for discussion as part of this development. I'm comfortable if the health and safety executive believe that 20 per cent is sufficient for them to get the right kind of return that they need. I think that the point for the extension is that that will have to come after completion of the final registration deadline. Is that right, Dan? Just in terms of the impact assessment being carried out, I know that it's more so from the UK Government aspect, but are you relatively comfortable in terms of the costs and the risks there? Yes, I am. I am in agreement with Rebecca Pau, who I know wrote back to the committee, and thank you for sharing those documents with me. Just as she put it, we believe that allowing the extra time could lessen potential burdens on businesses without significantly impacting on human health and environmental protections. We also recognise the potential for better quality data and maximising chances of compliance under the longer timescales. I'm in agreement with her on that. Just to remind people who are not at this meeting, that letter came in quite late last night, so it will be published on the website so that people can see it. Monica, I think that the next question is yours. Thank you, convener, and good morning. Minister, you said earlier on in your remarks that this involves a complex split of devolved and reserved issues. I wanted to ask if you can outline how the Scottish Government will ensure that devolved interests are represented in the development of the proposed alternative registration process for UK reach. Yes, of course. We are through the common framework process. We liaise very closely and we will continue to do that. My officials are part of the working group, which is currently looking at development of the registration system and how it might change. As I said, we have been given assurances about DEFRA making sure that there is sufficient capacity to get that work done in the time period. When it comes to approving whatever the final outcome is, because of the statute under which the process is undertaken, the Scottish Minister's consent, I understand, will be required and therefore the parliamentary scrutiny will be engaged there. Also, as I said, it is in response to Collette Stevenson. It will have to be accompanied by that statement in line with UK reach article 1, which sets out the confidence that it is in line with environmental protection and does not threaten any of that. I know that the divergence has been mentioned a few times today and some of the risks. Do you have concerns that the registration process will represent a significant divergence from EU reach? Are you aware of any desire or appetite in the chemicals industry or in the UK Government to move away from mirroring EU reach? I am not concerned that changes to the deadlines are a risk to divergence or convergence. I think that what might replace or change is still very much at the early stages, so I would have to withhold my view on that whilst we develop it, but we will certainly be making the argument for divergence being minimised as far as possible. I cannot really speak for industry, I cannot speak for the UK Government, but my impression is that it is about industry's problem is the cost of obtaining the data that is required under UK reach, much of which they do not own, is what the barrier is. We will have to find ways to try and overcome that, and that is very much early days, but our position will be to minimise any divergence as far as possible as that develops. I take that the Scottish Government will continue to engage with industry and stakeholders on that point. Yes, we certainly will, and I suspect there will be further consultation on the substance of whatever is expected to replace that. Just looking round, are there any other questions, Mark? I could let you in briefly if there was a subsequent question. Thank you, minister, for attending today and giving those answers. I want to move on to the next agenda item, if I may. Yes, of course, minister, I'm sure you'll want to slip out to carry out your other duties while we consider the UKSI. Our next item of business is to formally consider the type 1 consent notification sent by the Scottish Government relating to the Reach Amendment Regulations 2023 in light of the evidence that we've just heard and the additional letters. Before we go any further, I'm just going to remind members that, as a farmer, I do use chemicals, so I have some knowledge of the chemical system, but just so there's no dubiety about that. If members are content for consent to be given, the committee will write to the Scottish Government accordingly. Writing to the Scottish Government in this way, we have the option to pose questions or to ask to be kept up to date on relevant developments. If the committee is not content for the proposal, we might have to make one of the several recommendations that I could go through. I wonder if there are any comments from committee members on this. Mark, you wanted to make a comment. Yes, thanks, convener. I think that was a useful session today looking in some detail at the Reach model, both registration and compliance, but also how the whole model is evolving and developing over time. I just think that it's important now that, post Brexit landscape, the committees are able to scrutinise how common frameworks are working, how stakeholders are interacting with the development of these regulations going forward, so I felt that that was useful. I agree that I don't think that there is an alternative route that is desirable or achievable for the Scottish Government to take in relation to this. I'm content to accept the regulations that are before us, but I do think that there's a need for that on-going scrutiny. I would welcome more information about the alternative registration model, as that's developed over time. I think that the wider model that the minister talked about, particularly in relation to the points that are made about divergence and about reviewing existing chemicals that we're all using at the moment, which may impact on our health or our environment, needs to be watched as well. There are questions there about the pace of how that model is developing and the pace of how particular groups of chemicals are being reviewed continually as our knowledge and understanding of their impact develops as well. I think that if those points could be reflected in the letter to the minister, that would be good. I feel that this is the start of a conversation at the end of it. Fiona, I agree with Mark. I think that we should write in those terms to the Scottish Government. I'm also minded that we should acknowledge the letter from Rebecca Pow. We obviously wrote it quite short notice following our meeting last week, and I think that the prompt response was very helpful. I think that we should indicate that. Two things from that letter was one. The UK minister refers to the alternative transitional registration model, for UK reach, which we should express our on-going interest in. In that letter, she says, we are conscious of the question of divergence and that both industry and NGO stakeholders wish to keep unnecessary divergence to a minimum. I suppose that our issue is what is necessary divergence, and that's what we want to continue to monitor. I think that we should write in those terms and thank the UK minister for replying so promptly, because that is such an area of concern. I also agree with Mark that that indication of how common frameworks can and should work is going to be important to us and our on-going work in looking at implications particularly for the environment. Does anyone else have any comments? On that basis, I'm going to ask the substantive question. Is the committee content that the provision set out in the notification should be made to proposed UK statutory instrument? In agreeing that, if we do agree it, we can write to the Scottish Government along the lines that have been suggested, suggesting that we want to be kept informed of the pace of the change and any review of chemicals in the future, which I think would be a useful thing to do. As part of that, as the deputy convener has suggested, we could write to Rebecca Power, thanking her for a prompt response, ask her to detail out a bit more information on the alternative transitional registration and what divergence means. Is the committee happy with that? The clerks are happy as well, so we know what we're doing. I was going to pause the session to allow a changeover of witnesses, but they've done it before we've even had a chance to complete our business. We're going to crack straight on. Our next item of business is an evidence session as part of our inquiry into Scotland's electricity infrastructure inhibitor or enabler of our energy ambitions. Just to remind everyone, the aim of the inquiry is to scrutinise what electricity infrastructure will be needed to realise the ambitions set out in the Scottish Government's recently released draft energy strategy and just a transition plan and what will be needed to deliver that infrastructure. This is a short inquiry, leading to a report to the Scottish Government as it finalises its strategy. Last week, we heard from our first evidence session from two panels of key energy industry stakeholders and experts. Today, we're going to hear from Ofgem, the Government regulator for the electricity markets in Great Britain. We will discuss the evidence heard so far as Ofgem's views on the delivery of the aim set out in the draft energy strategy and on the decarbonisation of our electricity infrastructure. I'm pleased to welcome Stephen Mahone, the Deputy Director of Networks and the Head of Scotland, Ofgem and Jack Presley, the Deputy Director for Energy Systems Management and Security, Ofgem. Thank you for accepting our invitation and we're delighted to have you both here. Before we start, I believe that Stephen, you would like to make an opening statement. Good morning, committee members, and thanks for inviting us to give evidence this morning. As you said in your introduction, I'm Steve McMahon and I'm the head of Ofgem's office in Scotland. I'm also the deputy director that leads much of our work on electricity network regulation. I'm joined by my colleague Jack Presley Abbott, who's also a deputy director based in our Glasgow office. Jack oversees much of our work on connections policy and market design. Taking a step back, the IPCC report that was published last week concluded that only swift and drastic climate action can avert irrevocable damage to the world. The report runs to thousands of pages, as you'll be aware, but the message is crystal clear. Either we act now or it will be too late. The evidence has never been as clear as it is present and we need truly transformational and accelerated action across every sector, including energy. Given what's unfolded across the energy sector, particularly over the last couple of years, not least falling events in Ukraine alongside ambitious government targets for renewables and other forms of generation, we already knew that we needed to accelerate the shift away from fossil fuels to clean energy. That will help to reduce cost to customers by breaking the link between electricity bills and gas prices. It protects our security supply and provides secure and reliable home-grown energy. It helps to protect the customers from the dangers of unmitigated climate change. Basically, we're at the cusp of a transformational shift in the energy system. Probably the biggest changes that anyone involved in the sector will have ever seen. As the economic regulator of that energy sector, we have a responsibility to protect consumers and represent their long-term interests. That is a big change to the environment in which we operate. We need to act at pace to enable cost-effective infrastructure investment to transition away from our high dependence on fossil fuels and deliver a home-grown, cheaper and more secure net zero energy system. Over the next 10 to 20 years in particular, that will require an immense amount of investment in new network infrastructure that needs to be built in a co-ordinated way across generation and demand, built both at pace but also at a reasonable cost. That is the defining challenge that we face. Ensuring our regulation helps that infrastructure to be built as rapidly and efficiently as possible. When the wind farms right down to electric vehicles are ready to connect on to the system, the grid capacity is already in place. It is made possible with accelerated planning, environmental consent and network companies incentivised to deliver on time. The committee's call for evidence specifically poses the question about whether the electricity infrastructure is an inhibitor on enabler of Scotland's energy ambitions. Our response is that it must be an enabler. Everything that we are doing is geared around ensuring that our economic regulation can help to build the system that we need at pace, but in a way that protects energy consumers both now and in the future. Thank you. Thank you very much, Stephen. Just before we move into questions, I would like to remind members and those people who are listening that, as a farmer and a landowner, I have electricity transmission lines across the farm in the form of 11 kV lines, the small ones, the 33 kV ring mains, which are the bigger ones, and I am in negotiation for a 132 kV power line to go through the farm. At some stage, all of those will generate some income for the farm, so I want to be no doubt that I have some interests, and I will continue to make this declaration as and when I think it's appropriate, do so. I do not think that it inhibits me from doing my job as convener, but I want committee members to know that. The first questions, therefore, will come from Mark Ruskell. Yes, good morning. Thanks for joining us. The draft energy strategy discusses a range of targets for onshore wind. There is the potential for a target or targets for solar to emerge from the energy strategy as well, perhaps at different scales, embedded agricultural scale solar as well. There is potential for marine as well. Can I ask you about how those targets influence your approach to market design and regulation? Perhaps if we start with solar, it would be useful. More broadly, clearly, the Scottish Government has targets, the UK Government sets targets, and we see those policy ambitions growing and growing every year. How do we treat the targets? The targets are an important part of our responsibility. I think that we interpret our remit to deliver the policy ambitions and the decarbonisation targets that are set by government. I think that the key thing is then how that plays into the system planning. I mean, I think that you heard in the evidence session last week that we're moving to a kind of more co-ordinated, holistic network planning, and it's important that the policy aspirations, the targets for any source of generation are included in that planning process. I think that we also have to work with government just to understand what those targets are, and so does the industry. I think that we believe that we can help inform those targets and how that is set, and the policies that will sit behind them. Sometimes that might be the difference in terms of looking at the challenge. Is this deliverable, especially when you're setting very specific targets and specific locations? Can we deliver that? Can we do it in a way that probably avoids unnecessary costs? For any source that we see the information coming through in terms of the network planning, that feeds into the system, and then just in terms of the system architecture that would be in place to deliver against those? Just to add, it's clear with all the targets that we're going to have an increasingly renewable and therefore variable generation on the system. In order to do that, we have to consider, in terms of market design, ensuring that the signals are there for those assets to operate when they are able to generate, and then there is the flexible technologies there, battery storage, for example, that can respond when there are those variability on the system. I don't think that any of the markets are going to be radically removed or new markets created, but it's more a transformation of current markets that exist to ensure that they work for a very highly renewable and therefore variable generation. Specifically then, in terms of the network operators business plan, how would targets for onshore wind at 20 gigawatts, sorry, 12 gigawatts, and how would targets for solar impact on that? What would you practically change on the ground? I think that if you take bleak offshore and onshore wind at the transmission level, what you've got is the system operator, so we had the holistic network design, like the first iteration of that was published last year, and it told us, here is the network infrastructure that we need to get to 50 gigawatts of offshore wind by 2030. So that's the first step in that process and basically your low regrets investment. What then follows will be further iterations of that, so I think we're due HND to from the existing electricity system operator. That'll be published this summer, and that'll look at, for example, 25 gigawatts to Scotland winds, floating offshore wind in Wales, and look at what additional network infrastructure requirements do we need from that. We've tasked the system operator with producing something that we call the centralised strategic network plan that will be published in 2025, and that will look holistically onshore, offshore targets across the fully GB and say, what is the infrastructure that we need to deliver that, including any aspirations and targets that the Scottish Government set out. So that's at that level, the kind of transmission level in industry speak. When you're looking at things like solar, it might be that that does connect into the transmission system, but a lot of this is likely to come through in the distribution network, so we see that coming through the future, like distribution future energy scenarios, which then in terms like the business planning process and for the distribution network operators, so SPN or G networks and SSEN in Scotland, and then they factor that into their investment planning, like over the regulatory periods. Okay, okay, thanks Mark. Yes, you're coming back in later on, but the next question is coming from Jackie Dunbar, Jackie. Thank you, good morning. What role do you think Ofgem currently play in developing and regulating hydrogen markets? You know, what work has been done to date? Yeah, I can beat that up. So in regards to hydrogen, we're still awaiting many of the business models from the UK Government to deploy both hydrogen production and hydrogen storage. In terms of Ofgem's role, it's ensuring that the markets and the market design will work for that. We have a market for natural gas. Do we need to then transition to a way where we are able to buy and sell that hydrogen at present? It's going to be a mechanism by which we have facilities that can produce hydrogen, and then we have end-users, for example, industry that require that hydrogen to decarbonise their processes. So in terms of Ofgem's role to date, there hasn't been specific requirement for Ofgem to do so, because it's an industry that has been stimulated through UK Government mechanisms, but over time we see it that we are going to have to be ready for whatever form that hydrogen market takes, be it a quite specific between buyers and sellers or a more bigger traded market in the same way that natural gas is done. Who's responsibility is it to develop the regulatory regime—I can't say that word—for hydrogen storage, either onshore or geologically? What role would you have in that? In general, it's our responsibility to make sure that we get the right regulatory regime, the right regulatory environment across all the technologies that we are responsible for. Some of them are established, some of them are going to be new and emerging, but we see that as our responsibility. I think that when you've got these new technologies emerging, as Jack has set out, we have to work quite closely with Government just to understand what is the market arrangements that are in place around that, some of the commercial drivers that will determine whether they are going to be successful or not, but then making sure that we can build that into our regulation that's built into the system planning that ultimately allows us where those do materialise and are respective of where they materialise. Can we make sure that we've got the infrastructure in place to support them? I just push on that a wee bit. When we heard the evidence session last week, the storage of hydrogen was going to become critical to ensure that the supply into the future, i.e., it's not just in time, it's something that we've got to store. Are you going to have to develop future resources from your off-gem to make sure that that storage becomes available, otherwise it's not going to be a fuel that's going to be of huge use to us? Absolutely, and I think that generally applies across the board. We have to put our resources where it's needed, absolutely. If you look at, for example, the CCC report that was published earlier this month, that gave us a good feel for putting more flesh in the bones of what the system is that generates. The mix of generation is going to look like in 2030-35. Obviously, the dominant factor there is wind on-shore and off-shore, but hydrogen is a big part of that as well. I think that what they've done is set out how they expect these to be complementary to each other, particularly in Scotland given the natural resources that we've got. We definitely will make sure that we are resourced to have the right regulatory arrangements in place for hydrogen over time. It's something that is emerging. Okay, thank you very much. The next questions come from Collette Stevenson. Thanks, convener, and good morning. Just on touching upon off-gem and the energy markets as well, I know that the UK energy bill at the moment is going through the House of Lords, but there's a provision in there that we establish a future systems operator. Do you know what impact that that would have with off-gem, or do you believe that the establishment of an FSO will have on the whole energy system planning, and on that, what skills, experience and authority will that FSO have that existing agencies and systems operators do note at this moment in time? FSO work is something that we are very involved with at the moment. It's something that we're incredibly supportive of alongside the UK Government. What you're likely to see, we talk about our regulation adapt, and you'll see quite a big shift in the landscape in terms of the institution, the governance arrangements. From our point of view, like the single biggest issue is, if you've got an FSO that is responsible for whole system planning, it's charged with taking that responsibility, looking back at the GB energy system as a whole. What's the right generation that we mix? Where are we going to see production over time, and what impact does that have on how we orchestrate the system? There's a lot of responsibility that will sit with it. We have consulted recently, for example, on what our future model of economic regulation of the network should look like. We've had a very successful model since privatisation, but that, like everything else, needs to adapt and evolve. The emergence of whole system planning gives us a big opportunity. That can become the bedrock for network planning. If you've got the FSO as a co-ordinating body across the network that says, right, here is what we need to build, this is where we need it and by when, that then gives us a lot more certainty in terms of the decisions that we need to take. Potentially, our role might reduce slightly, that's not guaranteed. I think that there are different models over time, but certainly that's going to have a really prominent role going forward. What you've also got potentially is the same happening at distribution level. We think about a lot of the decisions that we have to take around net zero. A lot of them are going to be taken at a regional and local level, particularly around electrification, heat and transport. Can we do that same thing at a regional level? That's further back, but we are consulting on that at the moment, particularly around the emergence of new regional system planners. Can they create that whole system plan at a particular geographic level that reflects the network needs of that and the sources of demand and the opportunities that are available? There are two parts to that. The fact that they are bringing together the gas and electricity systems under one independent entity will give it that assurance and enable it to give proper strategic advice to regulators and to the Governments. On the electricity networks, how will that interact and add value to the work of off-gem and the FSO and vice versa? Is there a potential risk that it is becoming crowded and a bit fussy in terms of regulatory and forward planning? On the last point, the idea is that we try to simplify the landscape as much as possible. I know that that is an objective of the UK Government. We have got the work that is on going at the moment through Nick Windsor. That is on going at the moment and is expected to report in the not-too-distant future. That is likely to set out quite a series of recommendations just around what off-gem should be doing over time and how our model regulation needs to adapt. What he is able to do is look at some of the big strategic challenges that we face at the moment around network congestion, around connection times and to get a connection into the grid. We are working closely with the UK Government on that piece of work and we will see what the implications are. Generally speaking, there is an opportunity to try to simplify the landscape as much as possible. Everybody is laser focused on getting to a net zero energy system as quickly as we can and as efficiently as we can. I do not know whether you want to commend Jack on that. No, thank you. Okay, thank you. Mark, back to you. Obviously there has been a lot of focus on trying to decouple the gas price from the renewable electricity price. I wanted to ask you about the REMA review, the market access review, what your thoughts are on that, are the other proposals workable, are there particular pros and cons of the current access market arrangements, and what, if you could explore that a bit, that would be good. The review of electricity market arrangements is very welcome and, as I alluded to earlier, is that the scale of the challenge and the scale of the fact that we are going to have a largely decarbonised power system, with a huge amount of renewables on the system, means that we need to take a real good look at the market arrangements to make sure that they are fit for purpose for that sort of energy mix. It is important that, off-gem, it is a UK Government-led scheme and they are looking at different elements, which I think are the right areas. How do we deploy mass low carbon in a way that does it at lowest cost but does not impact the system from an operational perspective? How do we ensure security of supply when those assets are low carbon? Much of our security of supply is at the moment delivered by fossil fuels, delivering that flexibility that we need when there are those laws of renewable generation. Finally, where we have been putting our focus is, are the arrangements appropriate in the wholesale market, the market where we buy and sell wholesale electricity? Are they appropriate? Do they work in a larger decarbonised system? From off-gem's perspective, we have seen real value in really assessing whether there is a need for more locational signals within that wholesale market, indicating to people, to parties that they can cite in the most optimal location for the system, taking into account network, demand and then being used on the system in the most efficient way. We have been undertaking quite a lot of analysis about that. The cost-benefits case, the trade-off that needs to be really considered as part of that, if you were to introduce what is a very significant change to the market's arrangements. We have been working through that. It is still on-going, but we intend to feed that into the remer process and publish that more broadly. It is focusing on the right areas. We believe that there is a case for making sure that there are better, more granular signals to ensure that parties are using that system as efficiently as possible and that it can deploy in the right places at the right times. First of all, it has been suggested that off-gem has an ambiguous relationship with net zero, and there were proposals in a recent UK Government white paper to amend your statutory duties to include a specific reference to net zero. Do you have a view, Stephen? I will put this to you first. What would expressly changing off-gem's statutory duty to include achieving net zero actually mean in relation to regulation and design of markets and networks? It is a good question. It is something that is often talked about. We obviously work under a statutory remit that is set by the UK Government. That remit is to protect existing and future customers. We interpret that responsibility around future customers to include achieving the net zero targets that are set by Government. Whether there is a net zero objective on us, I do not think it would make a practical difference to us. Ultimately, we are already doing the things that we think we need to do to deliver net zero. I think that there is a chance—like through the upcoming strategy and policy statement and a consultation on that—that it may well give us an explicit duty around net zero or other clarifications around our role. In practice, I do not think that it would change that much because we are already doing the sort of stuff that is implied by it. I will bring Fiona in later. I think that she is going to wrap up some questions at the end. I am very grateful. Secondly, the Climate Change Committee has said that we massively need to ramp up transmission infrastructure. As I understand it, off-gem sets price controls for SPEN and SSEN, which regulate how much can be spent on investment and infrastructure. I noted in your submission that, on at least one metric, those two companies asked for 17 per cent more for EDT-2 than they were given. Given all of that, how will off-gem ensure that the next transmission and distribution network price control periods, post-26 and post-28, will deliver the investment and redesign of the network that we need? We are currently consulting at the moment that we have set the last of the real two generation of price controls. The new one for electricity distribution starts this Saturday, the 1st of April. That represents the overall challenge against the submitted costs by the distribution network operators or the individual SP energy networks or SSC for the Scottish licence areas. That is us making sure that they are delivering efficiently and in the best interests of their customers. If you take a step back, the real model of regulation that we have had in place since 2013 has evolved over time. Those are very agile and adaptive price controls. Yes, it is right that you have an ex-anti-set funding settlement for the companies that says that here is the amount of money that we are confident that we can set up front and you can charge your customers in return, here is the network, the level of service quality that has to go alongside that, here is the challenges that we are setting on your cost efficiency. What we have got increasingly now is in-period uncertainty mechanism. I think that there might have been some discussion in the session that you had last week. That allows us to adapt investment over time, to track the changes that you see in the economy because there might be new requirements on the transmission network or on the distribution network. It is good for the companies because it gives them a route to funding in-period. It is good for customers because it avoids any mis-targeted, inefficient or unnecessary investment up front. That adaptability gives us comfort for the here and now in terms of whether we can evolve over time to address net zero targets. If you look at the transmission side, the ASTI programme is a great example of that. Last year, we had an additional £20 billion of network investment on the transmission grids to give us what we think we need to deliver the 50 gigawatts offshore win by 2030. We are constantly evolving the price controls over time. There is quite a big discussion at the moment in terms of beyond 2026 and 2028. Do we need to do things differently? I think that quite possibly yes. I think that going back to the previous question about the system, architecture and what it looks like, institutions and governance, they are evolving. Our price control and regulation of the network should evolve as well over time. However, we do not have a preset solution on that. It is subject to consultation. However, we can say that it will be adaptable to allow us to meet the net zero targets. I am very grateful. Thank you very much, Liam. Monica, you have got some questions. Thank you, convener, and good morning. My colleague Liam Kerr has mentioned the CCC report already, as have yourselves. I wanted to come back to that report on delivering a reliable, decarbonised power system. It suggests that a step change is necessary in the delivery of transmission infrastructure to meet both UK and Scottish Government targets for renewable generation. I wanted to explore in a bit more detail what you see as the main practical constraints that GMFACE is delivering. You have mentioned a few examples already, but what are the main challenges and can you give us a bit more clarity about what needs to be put in place to support the increase in deployment that everyone wants to see? I am happy to start off. For us, there are a number of big challenges that we face. I think that there is quite a lot of coverage at the moment around network congestion, so the system balancing costs that we face in GB at the moment, and then the related problem in terms of connection queues to get a connection into the grid. We can influence that through our regulation. We have the ability to accelerate the network expansion. Alongside that, we can look at what can be done to reform the connections policy. Those are things that are more within our gift, working with the companies and the network companies and working with Government. I think that aside from that, there are probably two big things that we need to see happen in overtime. One is planning and consenting. I think that you have had some evidence on that in the previous session. We need Government to be getting on with planning and consenting so that that is not holding us back from delivering the infrastructure. The other thing is that the network companies are really getting on top of their procurement and management of the supply chains. If you take the right regulations in place—I think that the right market arrangements, as Jack was describing earlier—that enable an environment in terms of planning and consenting and companies that are managing supply chain issues, if all those things come together in concert, we can achieve the sort of ambitions or the challenges that are set out in the CCC report. You mentioned a couple of things here, so planning and consenting. You talked about the network companies themselves and procurement being at issues. To try to understand the so-called blockers and how we can unblock those systems, what is the issue? Is it a lack of people? Is it a personal issue? Is it a skills issue? Has Jim Dunne any work at looking at the skills mix across the sector? I just want to understand when people say that those are the things that are slowing things down. Are you looking for less regulation or is there something in there about the number of people and the skills that they have? It is probably a mix of everything. When you think about it, they sound very simple problems to overcome, but even planning. From the outside, you might think that planning is all devolved in Scotland, so it must be a matter for the Scottish Government, but there are some subtleties in terms of how that works in practice and the interaction with the Electricity Act makes it more complicated than we know that the Scottish and UK Government are working quickly to try and resolve that. That is something that is there. We are planning. When you need the amount of infrastructure that we need, that has an impact on communities across the country. We need to be able to bring them with us. We know that there is not probably an alternative to low-carbon infrastructure. We need more wires, we need more cables that have a disruptive impact. It is probably incumbent upon all of us that are involved to work with the regional and local authorities to make sure that we are bringing them through and listening to their concerns and responding to them, and that we get community benefits and lasting benefits from it. Do you have a view on whether the national planning framework 4 will help with any of that, or do you feel that planning needs to be a higher priority for Government nationally? Generally speaking, the NPF-4 is seen as pretty world-leading, certainly in a European context. You have to applaud the Scottish Government for the work that they have done on that. Whether it is enough, I am not sure as regulator we are best placed to probably advise on that, but I think that, certainly from the panel last week, there are improvements or further improvements that can be made around it. On the procurement and supply chain issues, the challenge that we have is that you have a number of countries that are also moving at pace, whether that be in the States or in mainland Europe. There can sometimes be physical constraints on the market and the ability to respond. You have long-term procurement in countries like Germany and the Netherlands. For us, it is like what can the networks do to make investment attractive as well? Is it long bundled procurement strategies that they can take forward to make sure that you are getting the supply chain involvement? People and skills depend on which number you believe, across GB overall. You might need between 250,000 and 500,000 additional skilled workers in the industry, so that is a huge potential. I think that working with the Scottish Government and its agencies in Scotland, the universities and the colleges, there is a mobilisation that needs to happen there to make sure that we have the right people coming through with the skills that we need to deliver on that. Jack wants to add anything? No, I can speak around the connections queue itself as well, which is a challenge. We build a network to connect the parties that are in the queue. Because of the success of allowing people to connect prior to all the network being built and also just the sheer investment that is proposed for net zero, we have a huge amount of assets that are planning to connect and get a grid connection. There is a question about, okay, we have got these parties in the queue, which of those are going to realistically deliver? If you can identify those parties that are not progressing at the speed that you want them to do or are not viable projects, they need to be removed from the queue that we call as quickly as possible because they are blocking because we operate in the first and first servers and you put in your connection application and get an offer, you must be connected before the person that is next in the queue. If a party is not progressing, they are blocking others in the queue. We are looking at whether we can speed up the removal of those projects that are non-viable, ensuring that the network companies and the system operator are considering appropriate assumptions because if they assume everything before it in the queue is built, then you are going to be quoted a date which is uninvestable because you are having to assume that all these parties are connected. So, if we take more realistic assumptions, we can bring those dates down, assuming that we can then remove them from the queue. I think that that point about viability is important. You have mentioned the queue a couple of times here. I just wonder how long is the queue that I have read for some projects that has been quoted as a connection date of 2035? Does that sound about right? It does sound about right. In certain areas, it is not a nationwide queue but there are areas where you are seeing parties quoted that date. That is also the case for parties at a local level because if they trigger reinforcement work, it is about removing those to bring those dates down. Is that the furthest that we date 2035 or are there any dates beyond that? 2035 is the longest that I have heard and there may be other cases. I am good luck at getting a quote for 2035. I suspect for connection to the grid. That may prove difficult. The deputy convener wants to come in with some questions for you. I think that we are getting to the number of the issue here and the concerns. Clearly, when you have queues, you have potential for delays for a number of reasons. Currently, in terms of the investable proposition, because clearly you have got to create the conditions for a market investment, all the risk for grid delays currently lie with the developer and the generators. Is there anything that you can do to rebalance that? You imply that you would want to investigate the viability of some of the proposals. That is a shift from an abler to probably, do I say, market interrogator. Is that what you are suggesting will lead to greater flexibility, adaptability and investment? With regard to those in the queue and the queue management, what it is is that there are a few things that we can do. The earlier and the things that we can do sooner is about introducing milestones for parties that are progressing their projects, that if they do not hit those milestones, then they will be removed from the queue. That is what I mean by saying that if they are not meeting those milestones, then we are yet to approve this, but if they do not hit those milestones then they will be removed from the queue. It keeps those projects in the queue progressing towards delivery. Does that answer the question that you were... Yes, but in a market condition basis that is quite an interesting state involvement in that operation. It is not the regulator. The regulator approves the milestones and the idea is that for each milestone you have to build a network to facilitate those assets on to the system. It is making sure that, when the network companies need to start investing in a new substation, for example, they are increasingly confident that those projects will be there. If they do not have the confidence then build the network and then that project does not turn up, then you have spent money on network that is not being utilised. In terms of where we are, concerns have been raised with us that often are not as adaptable and as flexible as they need to be. You have plans for the future, you have said that, but in terms of mobilising that immense amount of investment that you yourself have said are needed. Why are you so slow just now? Is that because you have not in the past allowed investment in anticipation of need, but you have said that you are improving that? What is that trajectory? This has got to accelerate at a huge pace. How do people have confidence and how do investors have confidence that often will be fit for purpose for what we need for that renewable energy expansion? It is an important point, because the idea that our regulation prevents investment ahead of need or has done is just not true. There is nothing in our rules or regulations that prevent investment ahead of need. For any network company under the licence, there is a requirement for them to be economic, efficient and co-ordinated in how they deliver and discharge their responsibilities. When you are installing assets that are 45 years in life, it is entirely reasonable that you should expect that obligation to include what is the demand that is likely to be materialised over time and how do I then size my intervention and response to that? That is for the companies to make the case that there is nothing in our regulation that has prevented it. I think that what you might get if you were to push a company and say, well, it is behavioural. Off-gem as the regulator in the past 10 to 15 years has been so preoccupied with cost efficiency. In some ways we have. We do not apologise for that, because ultimately all those costs go through consumer bills and we want to make sure that they are efficient, but we certainly do not stand in the way of good investment cases when we are investing ahead of need. What you have seen over the past few years is a good reference. That is investment ahead of need. Even before that, the green recovery programme that we announced in 2021, £300 million across GB, £50 million in Scotland, again anticipatory investment at the distribution level. We support more EVs, heat pumps, more low-carbon generation. I think that we have shown that it can be done. What you have unequivocally now is a mindset from the regulators. We have no option but to invest ahead of need, and we are encouraging the networks to do that, but to do it efficiently. In terms of your existing responsibilities, particularly for customers, that is where the location is in terms of the demand. However, from the generating point of view and the transmission point of view, you have seen charging costs, particularly transmission costs, increasing rapidly in Scotland. That provides uncertainty, and we know that business does not like uncertainty if they want to then invest at the immense amounts of investment that you have referred to. Is there something that needs to be done there to ensure that there are clear positive signals for investment? Has that dichotomy, which has existed to date, going to change in the future? I will come to Jack Jack's more of the expert on charging reforms, but generally speaking as a matter of principle, yes, we have to look across the full range of our regulation, the network regulation, charging arrangements and things that have held true in the past. Do they still hold true for the future? It is a very different energy system that we are likely to have. Traditionally, when you have more rural projects, there are two big costs involved in that. There is the actual cost of the investment itself, and then there is the cost of connecting it into the grid. The further that you are away from demand, the higher the cost is in terms of the network that you have to transport that electricity. There is a trade-off there, because I think that when we have had the debate in the past about charging arrangements, if you want the generators to pay less, consumers have to pay more. It is a zero-sum game, so there is a trade-off that has to be assessed, but it is under review. I do not know, Jackie, if you want to pick up on the details. Yes, absolutely. We have to recover the cost, so that is what the transmission chargers are doing. They recover the cost of the transmission network. I think that it is just to say that we are looking at it from two angles in regard to the transmission charging. In the interim, are we sure that the assumptions that are being used are based on the system today, rather than when the transmission charging regime was set up? We are going through what is called the TANUOS task force to ensure that those assumptions that we are using to calculate those charges are accurate and provide cost-reflective signals, but also give a level of stability for parties to be able to invest. Secondly, as we have spoken about the review of electricity market arrangements, what is the purpose of transmission charging when you have a changed electricity market? That is a separate piece of work. They are co-ordinated, but do you want transmission charging to be sending a signal when you have a different market arrangement in something that we are thinking about further? I think that the most expensive transmission cost in Scotland in Europe is as far as we are aware. In terms of your other responsibility for pricing for customers, we also have some of the most severe fuel poverty from a customer point of view, so there is clearly a mismatch there. The reason that we can generate so much renewable energy is precisely because of the rural nature of our geography and our offshore and our coastal lines that access the wind. There is definitely a mismatch here, and I think that it is the speed of decisions. When will the pieces of work that you are talking about emerge in terms of changing that policy and then giving more certainty for investment? I have one final question, if that is okay. Over the winter, we had to reprioritise our work. The transmission task force is restarting next month. It has already started, so it is not a new project. It is restarting of that and then working at pace. We have resourced that appropriately to ensure that we can get changes in place to improve the current framework with those incremental improvements around cost effectivity and stability over 2024 and 2025. In terms of the longer-term design of those, that is linked to the review of electricity market arrangements, which is a 2030. That is why we do—because of the importance of those charges, that is why there are two co-ordinators but separate pieces of work to ensure that there are the near-term signals that parties can still keep investing, but also that, in the longer term, they play an appropriate role so that we are not giving conflicting signals when we have potentially a change in reformed electricity market. It is just to clarify that we are doing those two pieces of work. They are co-ordinator, but we need to, because of the near-term importance of that charging and also the importance of coherence in the long-term. Finally, how does off-gen plan to ensure that the electricity distribution network is ready for the anticipated increases in demand, particularly for heat and also transport and electrification? How are you planning for the potential reduction in demand for the gas distribution network? The previous issue around the Chineost charges is right. It is a fact that Scottish consumers pay the lowest transmission charges in anywhere in GB. When you are looking at the generator, I say that that is when the picture looks different, but in terms of the distribution network, we have just settled the new regulatory price control for electricity distribution, as I said before, before it starts on Saturday. At the start, the big strategic objective of that is how we make sure that the distribution networks are ready to deliver net zero. That is where much of the anticipated investments are coming for EV, charging and heat pumps. There are a couple of things that we have done there. One is doubling the annual investment that is made in network upgrades in the distribution sector. That is a really sizable increase across all of the DNOs, including the two Scottish licensees. Going back to the point that was made before, we have agile funding mechanisms in place so that, if demand materialises faster than we expect, investment can track that. Most of the stuff and the big challenges that you might have are at lower voltage levels. We have automatic uncertainty mechanisms in place, so there is not an administrative role for off-gem up front. We have a unit cost, and if we have to do more work, the funding can match that. Those mechanisms make sure that the networks are going to be prepared to deliver net zero. On the gas question, that is one of the big questions that we have. What is the role of the gas network that is going forward? I do not think that we have all the answers to that. I think that we still await some of the Government's policies on the future of heat. At the moment, we have an asset that has to be managed. There are big safety issues. We have to operate, renew and replace the infrastructure. The existing gas price controls run until 2026. As we have said before, we are currently consulting on the regulatory arrangements beyond that. That will take a longer-term view on what the requirements might be of that gas network. Mark, you want to come back with a brief question. Is it accepted that the locational signals need to change? As far as I see it, the locational signalling at the moment is to build as much generation as close to the theoretical centre of the GB energy market as possible, which I think is Warwick. Last time I looked, I do not think that building renewable energy close to Warwick will have as as big a efficiency and load factor as building renewables in Scotland. You get more energy out of wind farms in Scotland than you would in the Midlands of England. Is that recognised that locational signals need to change now through to-now, so we need to be accessing and developing the resource where that resource is? We are looking at this through—like you said, the central point is one of those assumptions, the underpinning assumptions, that we want to make sure is accurate in terms of calculating those transmission charges. We want to ensure that the charges are as cost-reflective for today's system rather than a presumed historic centre. We need to balance that need to have a really cost-reflective signal, really accurate, with the ability for parties to know what the signal is and the stability of that signal. That is why we are convening industry experts to try and find that balance between the stability and the cost-reflectivity. The role of the charges is to recover the cost of the transmission network. It is a zero sum game. We have to recover those costs. Should it change, we are reviewing how more incremental improvements we are looking at in terms of the nearer term, the 24, 20, 25 changes. In the long term, there is a question about whether those signals need to be completely different or if that is no signal centre at all through the transmission charging. However, the crux of it is that we still need to recover the cost of the network through those signals. Does that answer the— Liam, you want to come in to you? Thanks, convener. Very briefly, to come back on some of the questions earlier, which I thought were interesting, on the timescales and processes. It is simply this, I was recently out at a big company that has some really exciting plans on building renewables and infrastructure, but they are restricted or inhibited in doing so because what they told me was that they need to apply for the grid connection very many years in advance, a grid connection that they will start paying for in advance of actually putting electricity into the grid. However, only once they have gone through that, then they need to get planning, then they will need to get the kit, then they will need to get the skills to fit it. So, when they stacked all of that up, the question becomes if we accept that that process, that timescale, that upfront investment is potentially going to restrict innovation and development or at least limit it to very, very large companies who can go through all of that, do you take a view on what precisely needs to change in Scotland and which agency or body in Scotland needs to lead that change to encourage the step change in renewables investment that we all want to see? I do not think that the responsibility sits with any individual party, I think that you need the whole system, Government, regulator, industry all working in concert to achieve that. I think that we have all our different bits of the system that we are responsible for and clearly all of these things need to be properly lined up. I think that when you look at the connection challenges that we have at the moment, a big change was in 2010 where we moved from prior to 2010 basically if you wanted to connect renewables, the grid capacity had to exist at that point. In 2010 that changed and it was more connect and managed, so the focus was get the connection made in the short term and then we will deal with the network implications like over time. That model had a lot of success because it had significant growth in new renewable generation. I think that the challenge now is just the scale of that that is coming through and effectively the network investment is playing catch-up. We know that that goes back to the fundamental point of strategic investment. It is more strategic expansion of the grid so that when it is a wind farm or whatever, a generation wants to connect in and then they have something there that is available, that probably goes alongside some of the reforms that Jack is talking about. I do not know whether you want to pick up in any detail on that. We still need to do all those steps, the planning, the grid connection, procuring the equipment. It is just a question about whether it could be more streamlined. With regard to the grid connection, I have spoken about it recently, but there is a case that, like I said, if this party is looking to connect today, they are behind all those other parties that have already applied to connecting the queue. Again, it comes to that point. Are those parties in advance of the queue going to deliver? If not, how do we remove them as quickly as possible? If parties are ready, even though they are behind them in the queue, can we, in some way, expedite their delivery without detrimenting others in the queue? We need to think a bit more agile way about how we manage those connections at the moment that it is first and first served. We just go through it in an orderly way, whereas could we think more or could the networks and the system operator manage that with support from us in a more agile way to deliver quicker those assets and those parties that are ready today? I am going to ask a question at the end, having been quiet during this meeting. Having watched the Buley Denny power line go up and the length of time it took to build that, having watched the substation being built at Buley getting bigger and bigger, and a substation being built at Black Hill at getting bigger and bigger, and the problems and consternation it causes with local people who live near it or see it. Do you think that the correct signal would be that actually what we want to be doing is transmitting this as hydrogen in pipe networks under the country, which seems to take less infrastructure and are less scar on the landscape? Do you think that that is a signal that everyone should be putting out, or is that too simplistic? That is a good question. Clearly, when you look at the electricity infrastructure, it is not economically viable to have that all running underground because the costs of it would be prohibitive. Do we have the confidence at the moment that you could rely purely on hydrogen? Probably not, but it certainly has a role to play. It is about looking at those things in totality. What does the system need for reliable and pre-improving operability and delivering that net zero system? There could be opportunities, especially in terms of the future of the gas networks. How do you potentially convert that into hydrogen over time? A lot of innovation work is going on around that at the moment where we explore it. Can it be done? Can it be safe? Can it be viable? That is something that we keep in open mind around. We have a system that is electrified that will increasingly become electrified. There is a role for hydrogen, especially in those hard-to-decarbonised sectors, potentially in other roles such as managing the power system. With regard to electricity, if you convert it to hydrogen, there is an efficiency drop. Every time you convert electricity to hydrogen and back to electricity, you lose through losses some of that useful power. We should be using that when we need it, but we need to balance that efficiency in those losses. If we just need the electricity, we want to get the electricity from one point to the other. Of course, you are right, Jack. There are also transmission losses as you generate and move electricity around the countryside on power lines. I understand the difficulties of putting a 400km power line underground. We discussed it on the line. It is possible. Things are moving forward just because what you have got is what you have got does not mean that it is right for the future. On that note, perhaps we should end that, and I am going to suspend the meeting now for five minutes to allow a change over of witnesses. Thank you very much for attending. Welcome back to the committee meeting. Our next item of business is an evidence session with Circularity Scotland as part of our consideration of the deposit return scheme. I refer members to the papers for this item. Circularity Scotland will have a crucial role as the scheme administrator, and today's session is about hearing more about that role and overall preparedness for the Scream's launch. I am pleased to welcome David Harris, the chief executive, Irene Steele, the chief finance officer, Simon Jones, the chief operating officer, and Donald MacKellman, the programme director, Circularity Scotland. Thank you for accepting our invitation. I would also like to welcome Fergus Ewing, Maurice Golden and Brian Whittle in attendance for today's session. I will offer you a brief opportunity to ask your questions near the end of the panel, so that the committees can ask their questions first. I believe that David Harris would like to make an opening statement. Thank you convener, and thank you very much to you and the other members of the committee for this opportunity to speak to you this morning. We recognise the parliamentary business and public interest in the deposit return scheme, and in us as the scheme administrators, and we welcome the opportunity to appear before you today. Before sitting before you today, collectively, we have over 100 years' experience in recycling, packaging, the drinks industry, fast moving consumer goods, logistics and the retail sector. I'm joined by Irene Steele, our chief financial officer. Irene has managed financial operations for Marks and Spencer, Heineken, the Edrington group and was most recently finance director of Genius Foods. Simon Jones to my far left, our chief operating officer, has 25 years' experience in retail and logistics and has worked across the UK with Tesco and DHL. To my right, our program director, Donald MacKellman, has managed major transformation projects across utilities, financial services, entertainment and the public sector. As chief executive, I bring extensive experience from leadership roles in the plastics and the recycling industry. The deposit return regulations 2020 placed new legal obligations on producers and retailers. To ensure that the scheme objectives are met, it's a type of legislation in the category of producer responsibility, which means producers have to take more operational and financial responsibility for the containers in which their drinks are sold. In simple terms, each producer must collect and process 90% of their containers to ensure that fees and deposits are paid to retailers. In practice, individual producers cannot operate independently to achieve that. Circularity Scotland has been established solely to deliver those responsibilities collectively on behalf of all producers who appoint us as their service provider. I am sure that we will cover the detail of how we were set up and are managed and operated during today's proceedings. We would like to say at the outset that we are proud to be involved in administering the deposit return scheme. We will make Scotland a cleaner greener place to live by ensuring that materials are recycled to the highest standards and by reducing litter. At the outset of this session, I would also like to personally offer my assurances that I understand all of you as elected members who will have engaged extensively with businesses and producers in your constituencies, some of whom may have concerns about the operation of the scheme. The team at Circularity Scotland is working incredibly hard to implement solutions to common concerns from businesses and to work through the scheme implementation on a one-to-one basis with individual businesses as appropriate. We have a team who are resourced, ready and willing to help, so if you have businesses in your constituency who are concerned, please put them in touch with us. To provide some information about Circularity Scotland's constitution, we are an independent not-for-profit membership-based organisation. Our members include drinks producers, retailers and trade associations, and together they account for more than 90 per cent of the scheme articles sold and returned in Scotland. We are governed through a membership agreement that all members sign, which sets out our guiding principles. Our members vote on the appointment of our directors who are all individuals of substantial industry experience. We were tasked with building the infrastructure for the deposit return scheme, which, with the largest waste management operation in the UK, we were charged with doing this within 15 months, and to do so without any startup resource. From that point, we have secured £100 million of investment, have a team of almost 50, and together with our contractor, Biffa, we will be creating 600 jobs. Although the deposit return scheme is new to Scotland, it is not new in other parts of the world. We have sought to learn from the growing amount of international experience. The deposit return scheme represents a major shift in Scotland's approach to recycling, and it will have an impact on every part of the country. We know that you have legitimate questions about the implementation scheme, and we look forward to answering those questions to the best of our ability. We understand that there is some confusion about the role of various organisations in the development, execution and regulation of Scotland's deposit return scheme, and we welcome the opportunity to attend this committee and help clarify the objectives of Circularity Scotland. Thank you very much, David. I just remind members what we are trying to do here is get to the hub of the problem and to identify the issues. I notice, and I just say as convener, quite a lot of interesting responses in the chamber, which are best for the chamber. This is actually to try and delve down into the nitty gritty of the problem, and I do hope that members will support me in achieving that. I am going to start off with the first question, if I may. Membership of Circularity Scotland is a pretty high bar, 10 million containers, 20 million containers on return, trade associations with more than 10 million. What slightly concerns me is how the smaller person, the smaller producer or retailer feels that they are actually represented in Circularity Scotland and their views are heard.  David, do you want to answer that? I am going to ask Donald, who was involved in setting the company up to provide a little more detail on that, but the first part of the answer to that question is that our membership involves trade associations. Trade associations are three of which represent convenience stores, so they are the small of the SME end of retail. Also, if we look across the trade associations on the producer side, we have Weiner spirits trade association, we have the Society of Independent Brewers, much more geared towards small companies and also people like the British beer and pub association and the British soft drinks association, as nominee are representing many small SME-sized businesses. I think that it would be helpful if Donald gave some more clarity around how the business was brought into being and how these rules were set. If we go back before the company was established, the deposit return scheme has always been set up as an industry-led initiative. Before the legislation was actually laid, four organisations, four producers and three trade associations got together to start thinking out how will industry respond to the new obligations that are coming their way. Three of those organisations were trade associations, representing a broad range of organisations size-wise. It was that group that came up with the general model of the membership criteria to try and reflect the fact that, yes, large organisations probably have more say, but absolutely have more of a role and a commitment to make with the guards to the overall recycling targets, but also to ensure that the smaller organisations had a vehicle to ensure that their views were expressed as well. That model was essentially codified into what you summarise, convener, so that of our 32 members, I think something like six or seven are trade associations. Those trade associations represent some of the smallest brewers and retailers in the country, but through the very competent and vociferous presence that their trade association has on the membership of the company, they have their views heard to the same extent as others around the table. I hear what you say. I am not sure whether I was a convenience store in a local village that I would feel that I was getting the representation that I needed. I will come back to that if I may at the end. I am going to go to the first set of questions that come from Jackie Dunbar. What I plan to do is I have a number of questions, so I will leave it in your hands who is best to answer them if you do not mind. My first question is regarding the challenge that is being flagged up with the gateway reviews in regard to transitioning the DRS scheme from something that is Government-owned to being industry-led. Can you explain to me how the transition is working? Are you confident that the different roles in the scheme, including those ones of yourself, SEPA, Zero Waste Scotland and Government, are clear? Do businesses know where to go to get the support that they are needed? We clearly have clarity about where our responsibility lies. We are industry's vehicle for meeting industry's responsibilities under those regulations. It is the job of Government to set the regulations. It is the job of SEPA to enforce and regulate them. We, whether it be as a member or as someone who registers for us to be their producer, their scheme administrator or producer, or someone who registers with a stop-rater return point, we answer to them. They are our customer. They are our master in this regard. What we have found is that overall, and I mean across society, there is a lack of a clear understanding of how those roles are defined. We seek, at length, to communicate this. We have communicated extensively. Obviously, we have websites. We write to affected businesses. We seek to find affected businesses. We have online marketing and marketing campaigns to communicate with businesses so they understand where we fit into this. We have also been on the road. We have held conferences and roadshows and spoken face-to-face with 1,500 businesses affected to try to get the message out and help to clarify. We found it being quite open, frustrating at the level of media coverage, which is not dealing with the facts of the work that we are trying to achieve exactly what our role is in this. We are not an arm of Government. We are here because industry has accepted its responsibilities. We are working hard. We keep expanding our communications capability to do everything that we can to enable people to understand that. That is why we do not say it likely when we ask that you have constituents who are concerned. We have a team sitting in Glasgow waiting to talk to them. We want to take business by the hand and support them through this process. If I could add one more point, convener, those of you who read some of the earlier gateway review reports will have seen recommendations about establishing a joint communications group made up of the Scottish Government, Zero Waste Scotland, SIPA, the regulator and ourselves. It is fair to say that, in the early days, there was an element of miscoordination. Those organisations, to a greater or lesser degree, wanted to have conversations with businesses around the specific roles that they played, because they have very clear, separate, defined roles. We took the view that said that we have to co-ordinate that. To your example, convener, a small convenience store wants to have a relatively simple, straightforward, consistent series of messages as we go through the process of working out what it is about and getting live. We have stepped into that and are co-ordinating and organising and ensuring that there is a consistency of message, timing and media to try to bring some simplicity to that. However, those individual organisations have very separate responsibilities. For example, SIPA, as the regulator, is very clearly sitting there to ensure that all parties adhere to the new obligations that they have. We work closely with them, but they also regulate us, so we have to keep some element of separation. I have been contacted, as you said, by the small convenience stores. One of the questions that they raised with me, which I actually got because I am a former grocery store controller, was their point of sale labels. They were saying that they are still trying to figure out how they have to have those labels, the shelf labels, with the DRS on them. They said that, if something costs £1, do they have to have £1 plus 20p DRS, or do they have to have £1.20? That includes the DRS. They are still trying to get confirmation from that. I know that the outside world will think that that is a simple thing, but when you have systems and programmes and everything behind the scenes, they need this information now so that they can be ready for 16 August. Can you give some clarity today? Yes, there are a couple of ways of responding to that. There are something like 35 different sections within regulations, so the impact of different people at different times. We pick up two of those. They are important ones, and they sit in the middle. However, we have responsibilities to ensure that we deliver the producer obligations to collect 90 per cent. There are absolutely new obligations that are landing with retailers to ensure that consumers understand when they are in a shop that it is not a 20p increase in price, it is a 20p deposit that they get back. Those are obligations that the Government has laid down on those organisations. We do not have a role, we do not have any control or influence over the retail side of things. Those organisations are getting a lot of help from their trade associations. SIPA has also provided some support, they have a very comprehensive website, but we do not have the ability to influence and control what those shop operations do, because that is a new obligation that the Government has said, retail. You have to comply with that. Between the regulator and the trade associations, those are probably the best sources of advice and support, because those organisations understand how a retail environment works. We are not able to give that advice, then who can I say that they need to go to get that advice so that they can start getting their systems in place? We are working with a number of different trade associations across the convenience sector. They are very expert in understanding how the regulations affect the retail side of things, and we think that they would be an excellent source of advice. Ultimately, SIPA is the regulator, they have a role to ensure that regulations are made available and understood to everybody, they have an excellent website, which would be also a good source of advice. I am slightly scratching my head on this in the sense that what is the advice, what are they supposed to do apart from consult with somebody else? The issue that we have is that, Donald, if I am wrong, but trading standards and SIPA have not agreed on what the correct approach is. Oh, sorry, but hold on. You are running the scheme, so somebody rings your office as they have just been advised to do. Sorry, I do not mean to jump on your question, but somebody rings your office as they have been advised to do to get the information that they need to run the scheme. The answer is, well, ring up SIPA or whoever else it was you suggested they do. That is not advice, that is passing the bar. I am sorry, I am confused, help me, please. We are not able to make that decision about what the correct approach is because it sits between trading standards and SIPA as the regulator to agree on what the correct approach is for shelf-edge labelling and also the pricing labelling on multi-packs. If we were to make a decision on this, we do not have the authority or the power to make that decision. I am totally confused then how the scheme works if we do not know what we are doing at the outset. You said that we are running the scheme. It is a short statement, but to be pedantically clear, we are not running the entire deposit return scheme. We have a responsibility to deliver a large part of it on behalf of the producers who sit with the legal liability. The legislation passed by the Scottish Government placed additional obligations on the retail sector, for example, to act as a return point. That is not within our scope. That is not what we were set up to deliver.  I went into a shop the other day, which will remain nameless, to buy small bottles of water at £3. Each of those bottles is going to be labelled and it is going to come up with an additional 20p for each bottle. My maths would suggest that the deposit is going to be more than the water. We do not know how that is going to be shown up to the consumer who is being told that it is not an increase in price. I am sorry, I am totally confused. I am coming back to Jackie Baill. For the vast majority of retailers, it is relatively straightforward. The regulations are quite clear. At the point of sale, make it clear to the consumer that there is a 20p deposit. There is obvious that they are going to get that back. That will be returned to them once they return the empty container. That is exactly how more than 50 other deposit return schemes around the world work. Hundreds of millions of consumers live and operate in that environment. It is absolutely a change to everybody in Scotland. There is no doubt about that. We have had a couple of different models of deposit returns, but they are very narrow and very operated. That is a national wide scheme. It sounds complicated, but it is pretty straightforward. There are some technical issues absolutely to be resolved with regard to some of the way that shelf-edge labouring is. I know that some stores use digital mechanisms. The point about where the deposit sits with regards to the price on, for example, a price mark pack is a matter that has been discussed between the Scottish Government and trading standards and is close to resolution. I am confused, because what you have just said would suggest to me that they should know how to put on the label, but they are telling me that they do not know what to put on the label just now. Do they have to have it separate, or can they put it together? To me, that is just a simple question. I agree that the exact point that you have raised has been a simple question, which has been asked of SIPA, the Scottish Government, trading standards organisations for some time. It has been owned for resolution by the Scottish Government. They are close to doing that. I do not think that there is any doubt whatsoever that that is not an ideal position. Government officials have been working very closely on it for some time. They are close to resolving that. I am going to push you to go to the next question. Having identified a question that has been raised with me is the collection of containers from the small retail sites. The manual uplift is not the vending machine ones.  I do realise that that depends on how many gets put back, but what is the criteria for the uplifts, if it is going to be a day or a week? It all has an impact on the space that the local stores are going to have. I am going to ask Simon, who is in charge of the logistics operation, to answer that question. We recognise that collections are important and that we want to create meaningful schedule that matches people's requirements and is efficient and as cost-effective as possible. At the moment, we are asking people to register so that we understand what those schedules look like and we understand where we need to go to collect. Particularly for small stores, we recognise that there is a big issue in terms of space. We are trying to ensure that those guys have the ability, when they register with us, to put down the estimated number of returns and which will calculate a frequency of collection. If they do not agree with what that frequency suggests for them, they absolutely have the opportunity to put some free text in to say why that is an issue and invariably it is going to be space. To which point customer services will get in touch with those guys and Biffle will get in touch to create the schedule that suits the needs of those businesses. We are trying to work with the small guys as well as the big guys to ensure that we create a collection schedule that suits their needs. If there are further issues, particularly for small guys, they have the opportunity to apply for an exemption. If they are in a rural location, that is obviously not ideal for them. We want them to get in touch. We will go and visit them and try to understand how we can help them to meet the needs of their shop and the needs of their collections. In regard to the exemption, am I right in thinking that there is a distance that they can only get an exemption if they are so far away from a bigger retail store, which would have an impact on some, is it 400 metres? There are exemptions also for health and safety, fire safety and food safety. Depending on the size of your store, if you are 100 metres squared or less, you can apply for an exemption on size. If you are 280 metres squared or less, you can apply for food to go or fire safety or health and safety. I have also been told that there is going to be an app for your mobile phones. I was going to ask for the manual take-back for the containers. Do you know when that will be up and running and for the small retailers to be able to get a grasp of now? It is in final stages of development and testing and should be available end of May, beginning of June and rolled out for people to be able to see what it does. How do you assess how well you are doing in being prepared for the August launch date? What is your level of confidence that you will be able to go live? Do you think that there are any milestones that you still need to reach in order for that to happen? There is a great deal to do. We did not set the timetable. We were given a timetable, and from the point when that was set, we had to find the money to run the operation, we had to establish the partners, put the contracts in place to build the infrastructure. From that point on, we have been working around the clock to deliver for the 16th of August. We continue to do so. We have a path to being ready. There are many milestones, as you would imagine, in terms of delivering IT systems, delivering the various elements of that logistics infrastructure, but it is happening. There are counting centres being set up, machines being installed, vehicles are on the way. It is actually happening in the physical world. One of the processes that we are constantly looking at is refining what is available on day one. The scheme will build up over time. However, in terms of how we manage and measure that, as you would expect, we have a very significant project management team in place. Donald, would you like to talk more about how we manage the process? Certainly, yes. It is a multi-workstream programme, as you would expect. IT operations, communications, commercial, all those things that you would expect. We have a great team of project managers and programme managers. We have all the traditional tools that you would expect to see in terms of risk management and contingency management. Our partners, who are obviously heavily responsible for large parts of delivery, have equally competent, strong teams. We have assurance over those in terms of regular staying group meetings. We have an integrated plan. There is nothing that you would expect to see in terms of a large complex delivery. There are risks ahead of us. We have plans in place to address those. As David said, we are confident that we are going to be on the 16th of August ready to go. There are a whole lot of supplementaries, which you have obviously let, if you will excuse the expression, the cat out of the bag. However, I am going to come to the deputy convener for a question, then I am going to go to Liam Kerr for a question. I just want to take you back to that very first question. Circularity Scotland, the name implies circular, it is end to end. In your answers, you have said that you are responsible only for the producers, and then you have offloaded responsibility for retail responsibility to seeper the trade associations and the Scottish Government. Are you implying that there should be a similar organisation set up for the retailers, similar to what you currently do for the producers? Thank you, Deputy convener. No, I think that it is important to clarify on that point. When we are talking about responsibility, resting with SEPA, for example, training standards, we are talking about a specific point in terms of the rules around labelling, which is very much outside of scope. Our responsibility, and if you look at the way we are, we are run 50-50. Half of our organisation is the return point side, which is retail and hospitality. Half of our organisation, the way they vote on any membership matters, 50% comes from producers. As part of discharging those responsibilities for a producer, it is our responsibility to provide that service to the retailer. The retailer has an obligation to operate a return point. It is the producer's responsibility to service that return point and obviously to manage the interface with that retailer. The regulations place responsibilities on a retailer just as they do for a producer if there are issues within that retailer's business, which they have, obviously, responsibility for meeting the obligations operating return point. We cannot make the decisions for them, but we are keen to support. We have a customer service team, we are keen whether it is the largest retailer or the smallest convenience store, to be in a dialogue with them and whether it be an issue with exemptions or with the service side and the collection side. The team are there to talk and support them so that there is that integration between us. Liam, you had a question. Very briefly, arising from Jackie Dunbar's question about your preparedness for 16 August, what contingency planning are you doing for the scheme if it is not ready to go live on 16 August? Thank you, Mr Kerr. We do not have... This timetable never gave us a great deal of time contingency. At the time, when we were appointed a scheme administrator at that point, the deadline for the scheme was July 2022. Within the application to be scheme administrator, we made it clear that we cannot deliver that. Following that, we made representations to Government around how we saw the scheme going live and we identified that the period of September to October 2023 was deliverable, but it contained a degree of risk and it did not allow for a great deal of contingency. That is the timetable that we are now working to, that risk has not gone away and the contingency has not grown. In terms of what planning we are doing for contingency right through the programme, we are looking at what alternatives can we put in. It is worth stressing particularly looking at the operating side of this business. We are building an infrastructure to cope with returns at 90 per cent. That will not be the case on day one, that we fairly extensive period where the scheme wraps up, so that with the level of contingency that is built into the scale of that infrastructure in addition to the lower volumes at start-up, that to a degree does give us some cover. We cannot buy extra days, but what you will see within the organisation is that we are continually applying more resource. When we look at the IT side of this business, we keep building up the resource so that we have, in effect, the additional teams covering elements. For us, we have an immovable object in terms of the date that we need to hit. If I may, one other additional point there, turning around slightly, Mr Kerr, when you have such an immovable deadline, another programme technique is to start looking at your scope. Unashamedly, there are things that we perhaps set out to say that we are going to have those in place for go live. We have had a long, hard look at what we do and do not need, and there are some things that we have said that we do not really need those for go live. To take the pressure off a tight timeline, we have moved some of the reports that we might like to have for day one. Let us bring them in shortly after go live, because there are more important critical things that we need to make sure that we deliver right across the scheme. Mark, some questions from you, and then I am going to go back to Jackie. Yes, thanks, convener. Shall I take all my questions? Yes, why don't you? Yes, okay. Maybe we could just sort of wind back a bit. I mean, there has been a lot of concern coming from certain businesses. I think that you have addressed some of those, but what do you see as the outstanding concerns that still exist? Obviously, one out—this is a massive and complex project. It touches thousands of businesses, and therefore there are legitimate concerns, and at no point do we dispute that those concerns exist. A lot of what we are seeing at the moment in terms of areas of concern is coming from smaller producers.  They have decided to use Circularity Scotland services to meet their obligations under the scheme. That does not mean that we are not listening to the other small producers that are out there. All small businesses, I am committed personally that this project that we are working on will not damage businesses, and therefore we will continue to do everything that we can to support them. What I would like to do is ask Irene to talk more about what we are actually doing in practice to support those small businesses. Struggle with us as a committee is to understand what are the real issues that have yet to be addressed compared to perhaps issues around communication, for example, which she raised earlier on, or issues that have perhaps already been addressed but have not been communicated. I am really interested to know what are the issues that you are still working on. In terms of working with producers and retailers of all sizes, one of the things that we are doing at the moment is running solution working groups for the end invoicing process. It is something that we are very supportive of and we are collaborating with the large and small retailers, wholesalers and producers of large and small size too, to make sure that across that supply chain there is a commonality and an understanding of how the invoicing, when items are placed on market, when they go into a depot, when VAT is applied or when VAT is not applied. I would say that this is an example of how it is not exactly within our remit to do this, but it is absolutely of everybody's interest and we are very happy to facilitate that. I would say that the clarity across the supply chain of the different stages of invoicing is one area that we have identified along with many of our members and we are working through that with them at the moment. That is one area. Are there other areas? In the first instance is particularly our Irans leading workshops with those concerned businesses to make sure that we fully understand their issues. One of the big issues raised particularly by small businesses was the cash flow impact of the scheme growing live. We put measures in place designed to address that, which we believe do, but there are still concerns. Coming from invoicing is one of them. There is a general level of readiness. Many small businesses do not have a great deal of resource to necessarily be ready for the 16th. Obviously, that is an area that has had a lot of discussion politically recently. We are keen to do anything and we are still looking at measures that can address some of those concerns. I think that the compliance approach that CEPRA puts in place, which effectively looks—if a small business is not ready, what are they doing and is their position reasonable? If I look more broadly at the scheme, this is a cost to producers. Therefore, there are concerns about what it will cost them and knowledge and visibility and understanding of that cost. In many ways, to an extent, it could come back to the governance point that you raised earlier. We were set up as a—our constitution sets out a number of things. One is that all businesses are treated the same. Being a member does not give you a privilege. Everybody gets the same deal. Everybody gets the benefit of the level of investment that is being made behind Circularity Scotland. Therefore, when we look at the cost of the scheme, ultimately, it is a feature of the regulations that have been passed that the cost of running this goes back to the producer. However, our remit and our commitment is to be cost-effective in doing so. That is why we have to sit in the point of conflict between the retailers who want a higher fee—the fee, which is the greatest cost to producers—and we have to manage that conflict, which puts us in a pressure point situation because we are trying to find a compromise. A lot of the talk with producers around the registration point has been about understanding what liability they are signing up for. Their liability is for £1.5 billion to £3 billion of the cost of running the scheme for every container that they put on the market. That is the extent of it, but, obviously, today we are working with forecast costs. We made a forecast last August that was a relatively high producer fee. We have been able to redesign the scheme subsequently and indicate up to 40 per cent reduction in that producer fee, but we recognise that it is still a forecast because we will only know what those costs are at the point that we go live. However, that reduction demonstrates a confidence in the abilities of the whole of industry because we cannot manage all of this ourselves, but us in the middle of an industry to manage those costs efficiently. Furthermore, if we look at the actual cost of putting the scheme in place, we sit here today or costs are below budget. If we judge ourselves by the results that we are delivering, we are managing our costs effectively and working tirelessly, particularly Simon's and Irene's teams, on making sure that the infrastructure that we build is able to operate efficiently and then grow in efficiency as it goes live. However, I am afraid that the concerned producers have about the cost coming from this. They can place trust in us to manage it, but the fact that the cost of operating a deposit return scheme becomes a cost of doing business if you are a producer of drinks. That is probably one of the more significant areas that many producers remain concerned about. Can I just focus on a couple of other specific areas, then, as well? I would like to understand what the challenges might be with this cut-over period. This is where you have scheme items and non-scheme items still in circulation. Perhaps you could offer some thoughts on how that might work with a grace period for small producers as well, because it feels that there would be a complexity there in terms of having items that are either in or out of the scheme. Pass that to Donald, who has been the one very much involved in the cut-over. There has been a challenge that this scheme has faced since the beginning. I am going to ask Donald to talk in more detail about cut-over. On the grace period for small producers, we really want to help small businesses with the transition to a deposit return scheme operating. Everything that you do with deposit return has unforeseen and potentially unpredictable adverse consequences. We have to be very careful that small producers who may be relieved at having a grace period do not find that they are commercially disadvantaged. If you are a small producer supplying a big retailer, that big retailer has a lot of power and wants things to be very simple. I would like this when I am speaking to small producers that they have to be very careful what they wish for with some of these elements that they do not find. They may be pleased that they are not having to address the deposit return quickly, but they may find that the business for the sales point of view is being disadvantaged. In terms of how cut-over will work, I will ask Donald to talk more about that. Certainly, when we ran the roadshows in the conference, I was the lucky person to talk about cut-over. I will refer you to my YouTube channel where the full presentation is there, so it is a long complicated process. I am not going to go into the real detail of it. In essence, cut-over is the process of moving producers, retailers, everybody involved in the supply chain from the current way of operating in Scotland to a world where deposit return scheme is fully embedded, where consumers are fully aware of purchasing items with £20. One of the unique elements of the scheme in Scotland is that we will have types of containers that will be sold just in Scotland, but we will also continue to have containers that will continue to be sold across the UK. That absolutely presents challenges. We are not shying away from that. One of the challenges of cut-overs is to help producers, retailers and consumers to understand that there is a transition. There will be some products that, as they are ramped down and flushed through the supply chain, will not attract a deposit. There will be new products coming through, which are the deposit-bearing products, which must be identified separately. The legislation has been reasonably well designed to try to accommodate that, so consumers can expect to see maybe part of the shelf that says, and retailers have an obligation to do this. Those items are not in the scheme, they are gradually being sold through. That will take a bit of time, two or three weeks, depending on the nature of the turnover of those goods. We absolutely understand that there is a strong requirement to support consumers in particular during that phase. We have already started to design what that campaign looks like in conjunction with retailers and producers. We will manage that process very carefully and get to the other side. The reason that we have the ability to have both UK-wide and Scottish-specific is, again, in support of smaller producers, because there are costs associated with changing our labels and changing our whole supply chain. That was recognised right from day 1 when the policy officers were thinking about that. We will deal with it. It is something a little bit different for Scotland. Other schemes have danced around it, if you like, but we have spent a lot of time working right across the industry to have a plan. We have published a guidance on that to manage it closely and help consumers to get to the DRS operation once we are past that. That is a transitionary period. As you said, that is part of the course with many other DRS schemes. However, if there was a grace period for small producers in the middle of that, I am just trying to think what kind of complexity that would cause. If you had a convenience store, for example, selling whisky and you had small distilleries that are not in the scheme and distilleries that are in the scheme, you would have quite a complex shelf of regional whisky, some in, some out. How does that work? I appreciate your point, Mr Harris, that the larger retailers might just go and forget that. It is too much. What other issues might there be with that grace period for small producers, for those that are retailing and wholesome? I think that we have touched on some of those. Cut over is a temporary period and we know that there are going to be some different ways of treating stock, but it is for a defined period. In some ways, and clearly more design on what needs to be done if that is the direction that the Government decides to go, a grace period for small producers could be seen to say that your products are going to continue to be outside the scheme. The biggest challenge in all that is bringing consumers along with that. One of the fundamental policy objectives is to change consumer behaviour, just as the behaviour of hundreds of millions of other consumers across the world have done so. To get in the habit of saying, I pay 20p and bring my empty container back, I get my deposit back. Clearly, if some container, some products are outside the scheme, there is a different message and we are going to have to be really careful that we support consumers in that process. As David has said, I also make sure that there are no unintended consequences as far as those small producers are concerned, because retail is a very slick, streamlined, automated process. It does not like things that are a bit different, so that is obviously a choice for the retailers to decide what to do, but they would rather have consistency, which certainly supports the consumer side of things. It is a challenge. If that is the direction that we end up going in, then we will work with industry to figure out a way to make sure that we manage that as best that we all collectively can. I have one more question. It is about the map of return points, which I know is a very specific aspect of the scheme, but it is important for people in rural areas. What point do we have certainty as to what that map looks like? You have already talked in response to Jackie Dunbar's question about the kind of collection schedules, which will be again hugely important for small rural stores that maybe do not have the capacity to store, but in terms of that map of where people expect to be able to take back their cans and bottles, when would that come? What we will see is a growing network. I do not expect that there to be all potential return points up and running and functioning as return points on 16 August. What I expect to see is an adequate network so that we as consumers can interact with the scheme effectively, and many stores will either be simply operating a manual point while they assess the situation or coming on stream as we go live. What we are concerned primarily with is making sure that there is enough so that the consumer is able to access the scheme. It is vital that all of us who are paying out those 20p's that we have talked about are able to, within our local area, without being inconvenienced to affect return. Simon, would you talk a little bit more about the mapping and the words being done to actually build the network? Yes, in terms of obviously we require people to register, so we have a list of retailers from small to large. From a mapping perspective, whether you go for three retailers or the nine major retailers before we get to the convenient skies, the spread is pretty much covered geographically and the small independence, particularly in rural areas, enhance that ability for people to return. As you would expect, the central belt is very condensed with retailers, and that causes us a logistical problem in terms of the number of collections in that aspect. We would look for exemptions to be taken, but certainly when you map out the large retailers and add in the small ones, you will get a good geographic spread across Scotland. There will always be places where someone lives that does not have a store, but in those instances we need to look at how we can support those communities at some point in the future. We have the benefit of learning a lot from more than 50 other schemes that have already gone live. One of the more recent ones that went live was Slovakia, and I always get confused about that, but we went live first of January last year. Even now, they are still adding to their return point network, as retailers decide that they want to be part of it, or that they realise that there is a scheme in place. It is an ever-evolving process. Our registration capability will stay open permanently. They decide to apply for an exemption and may decide what I recognise. I do qualify for an exemption, or perhaps the return rate that they were expecting does not come to pass. There is a lot of unknowns here, and we will not know collectively until the scheme is live, and we will really understand the dynamics of where containers come back. Thanks, Mark. Jackie, I think that you wanted a quick question here. Yes, it was just in regard to your speaking about the processes. Some of them are complicated and some of them are not. What support have you asked for from the Scottish Government and other agencies to try to help you to get through those processes? The main area—we are obviously in constant dialogue with Governments about the operational scheme as well as the regulator, and the word pragmatism has been used a great deal. I think that what has been issued by CEPR in the last few weeks about their approach to how they will regulate the scheme as it comes into being. The main area is to make sure that wherever possible, even at this stage, if we are able to simplify the regulations, make it more deliverable for industry. In many respects, if we can use common sense interpreting the regulations within that, the enforcement framework that CEPR has issued to make sure that, as a business, we are able to make common sense decisions about what works for you and what is the right—small retailers in particular understand their market, they understand their locality, they understand what is the right thing to do. We are keen, as much as we can, to be able to work with them to put in place so that we can collect if they are operating a return point in a way that works for them so that they can give the service that they want to give. If it is not the right thing for them to be a return point, we are keen to support them. That is why we welcomed the change on the exemptions. In terms of the practicalities, we are here working for industry. We are paying for this, so we are very much mobilising the resources across organisations such as BIF, RLG and PWC, who are building IT systems to make sure that we have all the capability that we can harness. We are in three continents in terms of the IT build to make sure that we are throwing all the right resources at that. We are working very much with Governments. I am happy to talk in those terms today about the more common sense that we can use in interpreting and implementing those regulations. If we let business people make the right decisions for their business, back to the point about having an adequate return network, the market will decide that for us. Those stores know that. If they need many rural areas in particular, they are there to provide a service. They will understand what they need. We just want to support them with a service that enables them to do that. Good morning again, panel. First of all, David, are Circularity Scotland concerned that, following the passing of the original deadline for registration, there will be a significant number of smaller producers who are currently marketing products in Scotland who still have not registered? If they do not by the l