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I will use the example of the licence conditions for the ScotWind contracts. The companies and the consortia that bid for those licences have to sign up to the conditions, which include local content with regard to the supply chain. As a result, there is a huge economic benefit to the whole of Scotland—not just the north-east and the Highlands—because we will have companies that are setting up and growing as a result of realising that the supply chain capacity will have to increase. That will not be done by any one region but by the whole of Scotland. By local content, we mean the content of the supply chain in Scotland. Those who were putting the licence conditions together made sure of that. I am looking at Mr Matheson, who was instrumental in that.

The devolution settlement had not happened when most oil and gas was discovered, so we did not have those conditions in place previously. As a result of the devolution of the Crown Estate, we have been able to work with the Crown Estate on licensing the sea bed for offshore wind power generation to ensure that licences come with conditions. However, there will also be conditions around some of the grants and loans that are associated with SNIB and with some of the support that companies get from our enterprise agencies. Some of that is to ensure that there is local content.

You talked about golden handcuffs. The approach is quite light touch, because it is obvious that the supply chain will be anchored in Scotland, as that is where the skills already are. If we get the conditions right, we will have a supply chain that is not just anchored in Scotland; we will potentially have orders from the oil and gas supply chain and orders for ScotWind, so the supply chain will have to vastly increase capacity to be able to serve those two industries. The term “handcuffs” may be overstating it, because it is a no-brainer that the supply chain will be in Scotland, as we already have a very healthy energy supply chain in Scotland, which will have to increase its capacity to serve both sides of the energy sector.

Thank you for the opportunity to talk to the committee about the net zero and energy part of the draft Scottish budget.

The budget for the portfolio is £900 million, which is an increase of £221.1 million from 2024-25. I appreciate the work that the committee is doing in its pre-budget scrutiny; as always, it is an important part of a much longer and wider process.

It might be helpful to set this conversation in the context of the Scottish Government’s overall approach to this year’s budget. The First Minister and the Cabinet Secretary for Finance and Local Government have made it clear that this budget focuses on delivering progress and laying the foundation for Scotland’s long-term success, and that it is set against continued and unprecedented challenges to public finances. The budget focuses resource across the four priorities that are set out in the programme for government, with which we are all familiar: eradicating child poverty, growing the economy, tackling the climate emergency, and ensuring high-quality and sustainable public services.

My joining you today is mainly about the third of those priorities—tackling the climate emergency. In 2025-26, we intend to commit £4.9 billion across all portfolios to investments that will have a positive benefit for climate. The £900 million net zero energy budget will strongly contribute to the other priorities as well, as we scale up renewable energy, restore Scotland’s natural environment and tackle fuel poverty. I hope and strongly believe that we all share those objectives across the Parliament.

I look forward to discussing the net zero and energy budget in detail.

As Mr Matheson will know intricately, Scottish Government ministers have powers to consent to developments of all types in the Crown estate, the sea bed and the landmass of Scotland. If we were to merely be consulted on things that were happening with GB Energy, that would take away from that power. A requirement for consent would dovetail with the consents that come to us.

The issue is really important when it comes to the strategic goals of GB Energy. Initially, when GB Energy was floated as an idea before the election, we all asked about what it would be. I am keen that we are an equal partner in the strategic actions that GB Energy takes. It is not there as a competitor to other operations; it must add to what we already have in Scotland. Having “consult” instead of “consent” means that, whatever those strategic priorities end up being, we would be consenting to them.

As the company develops, I want to see those strategic priorities provide additionality to what is already in the energy sector in Scotland and increase capacity in areas where required. For example, I am keen that whatever GB Energy is doing in the community energy space does not reinvent the wheel. We already have Local Energy Scotland, which is an organisation that was set up by the Scottish Government. I do not want to see another body—it would be confusing for the public and I do not think that there is any need for it. I was able to discuss with Michael Shanks how we could work together so that, if we already have vehicles in Scotland for activity that GB Energy is carrying out, we would be able to use those organisations and add the funding to their capacity, rather than have separate entities set up and badged with GB Energy. Those are a couple of examples.

If the strategic priorities require our consent, it means that, as it develops—I do not think that GB Energy is fully developed yet, but that is the point—we have the proving part in place such that, whatever direction it goes in, it must be with the consent of the Scottish ministers. It is very early days in relation to what GB Energy will achieve.

Yes. We look at EU alignment in absolutely everything that we do, both in terms of whether we give consent and in terms of our own bills. Nothing in this bill suggests anything in relation to EU alignment, so I am content in that area. It is a short answer, but effectively there is nothing that is an issue.

In principle, yes.

It depends on parliamentary timelines as well. As soon as we see the amendments, we will be able to produce an LCM. We will do that as soon as we can. It looks like we will be supportive of the bill and will want to give consent. The negotiations have come to fruition and, if the amendments are the way that we hope they will be, we will produce that LCM immediately.

There are other things. GB Energy is a consideration, but there is more than just that. We have a new UK Government that has very quickly become quite active in the energy space, particularly in consultation with us. We have had discussions about things such as community benefits. We have long been calling for the mandating of community benefits and having guidelines associated with consultation with the public. We are doing our own, because we are not waiting for the UK Government, but we want to work with the UK Government on any of its plans in mandating all that.

There has been quite a lot of policy shift from the UK Government, and the impact of that is why we have not published our energy strategy. We are coming to grips with that, and we are involved in it.

GB Energy is not feeding into our energy strategy, but our reaction to the policy shifts from the new UK Government has been taken into account. There is quite a lot there that we have to grapple with, and it is making a material difference to some of the things that we have in the energy strategy. We do not want to publish an energy strategy that goes out of date.

It is about having a level playing field, yes. As I say, the Deputy First Minister and Mairi Gougeon, who has responsibility for the Crown Estate, are leading on that. Again, the GB Energy Bill does not have much about the Crown Estate, but the Crown Estate Bill that is going through the UK Parliament does.

I can give a concise answer. My discussions with the UK on hydrogen have not been in the space of GB Energy. They have been on the export infrastructure for hydrogen and on how are we going to get hydrogen from Scotland, which is going to be a major producer of green hydrogen, to our customer base, which is largely going to be Germany. We need that infrastructure, and we need to work with the EU on that, as well as on the technical aspects of the standards that are associated with the production and export of hydrogen.

The discussions have not been specifically on hydrogen projects. If GB Energy wants to do hydrogen projects—again, how it might do that is a question for it—I would suggest that there is an opportunity. I do not want to upset the convener by going back to talking about Grangemouth, but there is a big opportunity there for the production of blue, and then green, hydrogen. A lot of that would be made much more commercially viable if we had track status on carbon capture and storage as well.

I have been having those discussions around hydrogen, but not necessarily in relation to my focus on GB Energy, on the bill and on ensuring that we have the consent responsibilities that I want us to have.

Thank you very much, convener. Happy new year to you all. I thank you and the committee for inviting me to discuss our approach to the UK Government’s Great British Energy Bill as well as our reaction to the bill and some of the discussions that we have had with the UK Government on aspects of the bill.

The UK Government has said that GB Energy has been designed to do four things: the production, distribution, storage and supply of clean energy; the reduction of greenhouse gas emissions from energy produced from fossil fuels; improvements in energy efficiency; and measures for ensuring the security of the supply of energy. Many of the bill’s objectives, particularly the production of clean energy, are already commercially under way in Scotland, and I am keen to investigate how Scotland can benefit, given our current advanced status as a green energy-producing nation.

We already have a strong pipeline of clean energy and a growing supply chain. We are at the forefront of floating offshore wind development, and we have a depth of knowledge and experience of community and local energy.

To date, I have had very positive discussions with the UK Government about the role of GB Energy and how it will dovetail with our already well-established activity, communities and sectors. Those positive discussions have been framed by the joint vision statement that I signed with the secretary of state in late summer last year, which commits the Scottish and UK Governments, alongside our public bodies, to working together to maximise the public benefit of GB Energy’s activities in Scotland.

The bill will provide a statutory basis for Great British Energy as a publicly owned and operationally independent energy company and will give the UK secretary of state the ability to provide financial assistance to GB Energy to enable it to become operational.

Since our legislative consent motion was lodged in August, my officials and I have taken part in many discussions on the bill with the UK Government. I am grateful to my UK Government counterparts for the positive tone of those discussions.

The Scottish Government is broadly supportive of the bill, and we have been working closely with the UK Government to ensure that it delivers for the people of Scotland. However, there were issues with two clauses that we wanted to iron out. Our negotiations on the bill focused in particular on clause 5(4), which concerns the level of engagement that the UK secretary of state would have to have with the Scottish ministers when preparing a statement of strategic priorities for Great British Energy. I am keen to ensure that the bill contains proper recognition of devolved interests and that the Scottish Parliament has opportunities to scrutinise matters within its competence.

I am pleased to say that discussions have progressed well, and I have emphasised to the UK Government the importance of tabling the relevant amendment in a timely manner, so that we are in a position to give legislative consent to the bill. That will allow the Scottish Parliament and this committee to have sufficient opportunity to scrutinise the bill. We will lodge a supplementary legislative consent memorandum once the UK Government has tabled the amendment that we have been negotiating on.

I will continue to work with counterparts in the UK Government as its plans for GB Energy progress, not only in relation to the bill but once it has been passed. I look forward to answering the committee’s questions.