Cynulliad Cenedlaethol Cymru

Hi. I'm Andy Regan, I'm a senior mission manager at Nesta.

Good morning. My name's Kate McGavin, I am chief strategy and policy officer at the UK Infrastructure Bank, which I do as a job share.

Thank you very much indeed for those introductions. Perhaps I can just kick off this session with a few questions. Can you tell us briefly about the work your organisation does to support or influence investment in decarbonisation? And what do you think should be the key objectives for Governments to consider when deciding where and how to support investment? Perhaps I can start with Andy.

Hi. So, at Nesta, we're an innovation charity and the mission work we do is focused on accelerating the decarbonisation of homes, so everything we say in this session comes through that lens. Obviously, that means we have a strong focus on reducing barriers to uptake of heat pumps, including things that reduce the cost and increase the appeal and wider skills and workforce issues. So, we've looked closely at what a consumer finance product for home owners might look like. I can probably say a lot more about that later in the session, but that's our particular focus: very much the end-user perspective on finance and borrowing to speed up the transition. 

Kate.

Thank you. Yes, so, the UK Infrastructure Bank was established almost three years ago. Our sole shareholder is HM Treasury and we were capitalised with £22 billion of finance to be able to deploy into economic infrastructure.

So, we have two objectives. One is to support climate change and the pathway to net zero, and the other is to support local and regional economic growth. All of our investments have to meet one of those two objectives or, of course, they can meet both. Our investment can take several different forms. So, £18 billion of our capitalisation takes the form of guarantees—so, £10 billion is guarantees and £8 billion is debt or equity products—and then we have £4 billion ring fenced to lend to local authorities at a discounted rate. So, local authorities can borrow from us slightly cheaper than from the Public Works Loans Board.

All of our investments, as I said, need to be in economic infrastructure and our investment has to be additional. So, we will never crowd out private sector investment; if our finance isn't needed, we won't get involved. So, our investment needs to mobilise and crowd in private investment. They obviously need to be in our core sectors and we also need to make an economic return. So, we are not a grant-giving organisation. The other thing that we're not is a project developer or sponsor. We are headquartered here in Leeds. We have a large front office of infrastructure experts looking to deploy capital into all parts of the UK.

Just to your second question about Government focus, we might talk a little bit more about this in more detail on some of the sectors, but I guess my perspective on this is that Government having a really clear focus on the pathway that it wants to take to achieving net zero is extremely helpful for us being able to mobilise and crowd in with private finance. So, the clearer the strategy, the clearer the milestones that the Government wants to achieve, the better able we are to mobilise around that and to help private investors have the confidence and think about how they might be able to bring in finance to help the Government achieve those aims.

Kate, how are you engaging with organisations in Wales to maximise awareness of the investment and support that you offer, and its potential benefits to local economies? What level of interest have you actually had from Welsh public sector organisations and businesses? 

I guess that the first thing to say is that we take our UK-wide mandate really seriously. Our objective is that if there is a project anywhere in the UK that meets our investment criteria and is in need of public finance of the nature that we can offer, then we really want to make sure that we know about it, and that we have been able to have a conversation with it.

The other thing that I should have said is that our minimum ticket size is about £25 million on the private investment side. So, we sit more in that kind of scale-up end of the investment curve compared, for example, to the BBB or perhaps the Development Bank of Wales, which has smaller ticket sizes and might sit earlier down that curve. On our local authority lending side, our minimum ticket size is £5 million, and that was set by the UK Treasury. So, those are our ticket sizes.

We want to make sure that we are engaging across the UK. Over the past three years, we have been doing two things at once. We have been setting up the bank. We started with a really small team. We are now pretty much fully built. But over that time, we have obviously been trying to make investments and develop our workforce at the same time. So, it has been a gradual build.

In terms of our engagement with Wales and with bodies in Wales, one of the things that we have just done is that we have been appointing banking and investment directors in each of Scotland, Wales and Northern Ireland. Our Scottish banking investment director has been in post for a month. Our one for Wales should arrive in September. They have been appointed, but they are just working out their notice period. We are really pleased to have done that. They will have a really small office space in Cardiff, but we think that that's a really important way for us to make sure that we have someone on the ground who is able to engage, both on the private and local authority side of our business.

To date, we have talked to the Welsh Government, we have talked to the Development Bank of Wales, we have also talked to the likes of Natural Resources Wales, and we have done a set of engagements with local authorities themselves, or with groups such as the Cardiff capital region. We have a number of transactions in the pipeline. I obviously can't talk about the specifics, but looking at the pipeline this morning, we have probably got about half a dozen in there at the moment.

Obviously, things come in and drop out all of the time, because we might find that our finance isn't quite needed, or the project isn't quite ready for our investment. But that gives you a kind of sense of the sort of level of activity that we see at the moment. I certainly think that ports and things like HyNet—the CCUS and hydrogen cluster—are two of the things that I would call up as really big areas where, obviously, lots of finance is required. We see those as big areas for focus.

Thank you for that. I will now bring in Samuel Kurtz. 

Diolch yn fawr, Gadeirydd. Good morning, panel. Talking about public investment, we have heard from a number of stakeholders that the Welsh Government should prioritise investment that leverages in private sector funding alongside it. Can I ask to what extent you agree with this, and in your view, what are the best ways that Wales could maximise leverage of private investment? Andy, we will start with you. 

Thank you. Thinking about the challenge of decarbonising homes, it's perhaps helpful first to just set a benchmark of the amount of money that I think we are talking about that needs to be spent. So, a very, very crude calculation: if you assume that a retrofit of a home with a heat pump in it is going to be in the ballpark of £15,000, times the number of homes in Wales, that's about £20 billion that needs to be spent by someone.

Clearly, all that money is not going to come from the public purse, whether as loans or grants. So, you are going to need an amount of private finance coming into the mix. Some of that may be home owners spending it out of their own pockets—out of their own savings, or borrowing, or whatever it's going to be. But that's a lot of money, and it's very crudely calculated. It will be lower with economies of scale and such like, but it's not going to be a whole lot lower than that over the time we've got.

I think one of the opportunities I really see for the Welsh Government at the moment is the Development Bank of Wales. I think it's widely known that it has been developing a retrofit loan pilot, which obviously targets the problem of individual home owners, giving them a way of borrowing to fund that. I think for that to be done in a smart way, as a development bank, that's an opportunity to crowd in private finance by showing that there is a market here for it, de-risking it, showing what models will work, and there are opportunities in that space to also stimulate the supply chains around it and get the skills and workforce.

The other thing that I think the Welsh Government could be focusing on is its planning powers. Obviously, there are issues around renewable uptake, but at a local level we've begun, as most parties in the space have, by thinking about switching one home at a time—so, how do you get a home owner who's fairly affluent and potentially in a position to upgrade their home to do it. But increasingly we're exploring other ways of doing it in a more co-ordinated way—so, instead of thinking of house by house, could you think street by street, neighbourhood by neighbourhood, village by village. There's an opportunity there. 

We're doing a project at the moment to develop what we're calling a policy blueprint for where we think there's a gap in the planning system—where stakeholders have told us there's a gap in the planning system. Sometime this year, we're expecting to see local area energy plans published for each part of Wales. They need to link back up to strategic priorities for the National Grid at GB level, and then they also need to make sense down to the level of individual householders. That's where we think there's a gap for what we're provisionally calling 'local heat partnerships'. That will be something that plays the role of engaging the home owners at a local level, commissioning what the right solution is for their street, and then ultimately helping bring in different finance models for that.

As Kate's alluded to, big, big investors need to be looking to spend large chunks of money at the same time. So, the £5 million figure that Kate suggested for a local authority level, using my same crude calculation from earlier, that's about 300 or 400 homes that you would need to package up into one investment vehicle in order to attract that finance. In terms of what we're imagining and trying to design with people who would actually have to interact with it, one of the things it could do is provide an opportunity to bundle up multiple homes into a single investable unit—a high optimism scenario—as well as all the other things it could do around buy-in. So, we are engaging the Welsh Government in that work. It's early stages, but we're quite excited about it, and I think it is a potential opportunity in the finance space as well.

Thank you for that, Andy. Kate, I saw you nodding along at some points there to what Andy was saying. What are your thoughts on this?

Shall I just build on this retrofit example? I think it's quite illustrative to talk about a sector together. Retrofit is exactly one of those sectors where, ever since we opened, people have come to us and asked us, 'Can you help?' I feel like we've spent three years going round and round this question, but it's exactly one of those problems that's really hard and where we would love to be able to play a role.

The way in which we engage with a problem like this is, first of all, we look at policy and we make sure we get close to the policy officials who are thinking about this, we understand what they're trying to achieve and we understand the levers at their disposal, so the grant funding or any non-financial levers that they have to use. Secondly, we talk to the market, so we get their perspective on where are the barriers, what are they looking to achieve, where do they see opportunities, and I would say that I'm not sure that financing is the key barrier.

I think that, in all of this, as I think Andy's alluded to, the customer journey, if I can put it that way, is really crucial. I think that's a place where public bodies and the Welsh Government can think quite deeply about how do you make it as clear as possible to customers and consumers what they need to do and how they can go about doing that. Then, we take those discussions back in-house and we think about what are the levers we've got to play with and how might we be able to be helpful. As I said, we've kind of gone around this many times, we've almost got close and then had to back off something for whatever reason, but this is something that we haven't given up on at all.

One thing we have done is our local authority team have lent to the Mayor of London's green finance fund. That is actually a piece of aggregation, not quite the way that Andy talked about it, but this point about how do you invest in a way that is going to then be able to deploy capital at that smaller scale. So, we put £190 million into that fund, and that will help with some of the decarbonisation at a household level.

And then secondly, I am really hopeful that, later this year, we might close a transaction on the private side, particularly the social housing area—part of the market is one where we think we might be able to be helpful. It's clearly not going to solve all of the problems, but one of the things that I think mobilising our finance helps with is then unlocking the supply chain and helping develop that. Because if we can create demand in the market through our finance, then, as I say, that draws through the skills and the supply chain piece. So, that's an example, I guess, on the retrofit side.

More generally, I would come back to this point about strategy, about clarity of the strategy. And certainly, yes, grant and other forms of Government funding definitely have a role to play, but it's not the whole story. We're absolutely going to need private finance here. The question is how do you do that in the smartest way such that you do this quickly, but you also have an appropriate sharing of risk and reward between the public and private sectors. 

Thank you. That segues quite nicely onto my next question. The Development Bank of Wales talked about hybrid funding, where there was an element of non-repayable funding alongside repayable funding. I was just wondering what your views on this funding model are, Kate, and what circumstances you would see it being beneficial in. Is the retrofitting an example of that, or are there other examples that you can give where this hybrid funding could bring benefit?

I think we see a lot of this, absolutely. I would term that grant—so, non-repayable funding. The way in which we operate alongside grant is—. We do this in a lot if not all of the sectors that we're active in. Let's take carbon capture, for example. That is a sector that we have identified as being a sector that we think we may be able to be useful in. There are some big milestones ahead that the UK Government has set over the course of this year. The Department for Energy Security and Net Zero has grant to deploy here and has been putting that through a competitive process. But in that sector, obviously, you've got grant sitting alongside other levers, like regulatory levers, and then our finance can come in alongside that, whether that's debt or guarantees, to complete the picture, to allow us to then mobilise private finance, either immediately or over time, as the sector matures.

I think grant will always have a role to play. I don't think it's always the right lever, because grant can be clunky, can be slow. If a Government declares that they're going to begin a grant funding programme in a sector, you can find that private investors then sit back and wait for the grant, which, as I say, can slow things down. So, we always look to get as close as possible to Government policy teams, to help them think through any sector intervention that they're thinking about, and try and help them think about whether the grant is the right lever or whether there are other ways of accelerating development in the sector that might not start from grant.

Thank you. Andy, just before I come to you on this point, I'm just thinking about my personal experience here, as I see it. As a first-time home owner of a certain age, I get targeted with specific adverts from organisations, businesses, who are saying, 'You could be eligible for grants to deliver X, Y and Z for your property to decarbonise', using that example. Is that the private sector looking to make money off of the grants, and they are acting as an enabler there to link in the properties, the individuals—myself, as an example—with the grants available? They must be making money off of that, surely, otherwise they wouldn't be doing it. Is that an example of hybrid funding, or is that just the market looking to make the best of a situation that isn't being developed very well—as in, there isn't enough take-up, there's a failure in the market of take-up, so that these private businesses come in and try and act as enablers? Kate, I'll stick with you on that point. Sorry.

I'm not completely familiar, I guess, with the example you have in mind, but I guess what I would say is that, on a sector retrofit, one of the difficult things is how you complete the circle, I guess, of how you make sure you’ve got a revenue stream. So, retrofit measures obviously can be quite expensive, and the repayment over time can be very long—a small amount of repayment over a long period. I think there’s quite a lot of innovation in the market. I think Octopus, for example, have done some really interesting things here. But I guess that all of the business models that we’re going to need for the different bits of net zero, a lot of them look quite different, so it’s really important that we take a sector-by-sector approach. That’s certainly what we do—to look at where is the sector now, what kind of support does it need to get off the ground? Sometimes that will be grants, sometimes it will be something different. And then, how can we, certainly as the bank, come in and help to be most useful, and help, I guess, deploy our taxpayers’ capital in the most efficient and effective way?

Before you go on, Sam, I know Jenny would like to come in on this very point. Jenny. 

I'm just interested to find out if you've had any interest from the transport sector. So, leaving aside buses, which we are about to re-regulate, there are all sorts of other transport that we need to decarbonise, whether it's the bin trucks of local authorities or the transportation of goods between one location and another. These are huge issues, so I just wondered if you'd had any interest at all from local authorities or private firms around this. 

We have done a project with Transport for Wales on zero-emission buses, but that wasn’t your question. We’ve had conversations with the Department for Transport at a UK level about some of their grant schemes in this area. We’ve also made some investments in electric vehicle charging networks. Have we had any discussions with local authorities specifically about their fleets? I don’t think we have in Wales as yet, but we’d be very open to them if those local authorities—

Okay. And freight companies—any interest from them?

I think we have had a conversation—I'm trying to remember our pipeline—about hydrogen trucks. I don’t think it was quite right at the time, but you’re absolutely right, this is a really big challenge. So, I think we’re going to need to spend some time in this sector looking at what’s the most likely solution or solutions.

Thank you.

Back to you, Sam.

Thank you. Andy, I'm just wondering if you had anything to add on a hybrid funding model.

Yes, I'm happy to comment on both the questions you've asked. I think part of your supplementary question was would we see businesses trying to pitch services that include a Government grant to home owners as a hybrid. That's not quite how I would think of hybrid funding, but there is a good example of that in the retrofit space, which Kate has alluded to. So, the UK Government offers a grant called the boiler upgrade scheme, which will pay for heat pumps. It's a flat grant of £7,500, so many companies are now leveraging that. We think most heat pumps that are going in are benefiting from that at the moment, and Octopus, which Kate has mentioned, are really heavily throwing a lot at that and offering people heat pump installations that they're pitching as potentially even £0, because the BUS grant will cover it for that home owner. So, it's not quite hybrid funding, but it's an example of what you're talking about, I think, in the retrofit space. 

On the original question about the development bank, I think we do agree with their take that that's a good model. For context, we did quite an in-depth piece of work in partnership with the development bank to help them develop their retrofit finance offer, including, amongst other things, some quite in-depth user interviews, and then a large-scale behavioural science experiment, to test different options. So, within that—. The German development bank has a vehicle called KfW, and one of the elements of that model that has made it work over the 20 years that it's been going is that it does include hybrid funding, so essentially an element of grant, which they frame as cashback. So, they're quite focused on really deep retrofits that have really extensive demand reductions, and if you as a home owner hit your target for your energy demand reduction, you can get an amount of your loan converted into grant at a later stage, and you can get it back, or you don't have to repay it.

So, that was one of the models that we tested in our online experiment. About 8,000 people responded, so a really chunky sample. It was a randomised control trial, so we compared the Government-backed options the development bank do with just a generic high-street loan. All of the Government-backed loan options outperformed the high-street loans by about 10 per cent, and the one where we included that cashback option, based on what KfW do, was even better. So, it was 38 per cent in the control group, 48 per cent for the baseline loan, and 50 per cent uptake in this experiment who went for it if it included cashback. So, there's a slight effect there. You could see it. Clearly, anything that reduces the amount of borrowing is going to be appealing. 

And I think, finally, there are also quite smart ways of using that that would move away from what we tested, but one of the things a home owner will need to think about is getting the home assessed properly. Nobody should really be going down this route without somebody looking at their actual home. That can be an upfront cost of a few hundred pounds or more. So, you could conceive of a product that includes a small element of cashback or grant to retrospectively cover that upfront cost to a home owner. So, even if it's a relatively small amount, if you target it and pitch it in that way, it will wipe out the upfront cost of you going on this process. I could see that working potentially quite well for some home owners.

Okay, excellent. In the length of this inquiry, we've been told that there needs to be a clear signal to make Wales an attractive place to do business and invest, especially around the green economy. I was just wondering what your experiences are of whether Wales is a good place to invest and what signals the Welsh Government could give to incentivise, to show and demonstrate that it is indeed a good place to invest and spend money. Andy. 

Again, just focusing on homes, I don't think any part of the UK has quite cracked this yet. It's a particularly tricky problem because you are talking ultimately about millions of individual decisions. I think the signal—. There's a signal within the draft heat strategy where Welsh Government has offered a lot of clarity about what the solutions for homes are going to be. They've made clear that they think most homes will be served by heat pumps, which is good news. Amplifying that signal will help because with the best will in the world, most people in Wales have not read the Welsh Government's draft heat strategy—I have—but sending a really clear signal to home owners and to people in gas and other trades thinking about their long-term career—all of that helps with investment in the assets and the training, and growing medium-sized businesses to do the installations. 

The other signals could come from planning. As I said earlier, it's really helpful to have local area energy plans. It's even more helpful if they're backed up with really credible delivery plans, because most investors who are looking at—I'm not necessarily just talking about homes now, but where they can put their money in a renewables asset or a package of homes, they have the opportunity to invest in not just different parts of the UK, but different parts of the world, and they will choose the ones where the projects look most viable. So, again, that gap between the plan and the delivery can really help amplify that signal. And, again, it's just thinking about different models that could be explored to try and package up more homes into investable packages, as I said earlier. 

Thank you. Kate, is Wales an attractive place to invest, and what signals could Welsh Government give? 

So, I really agree with what Andy said, and whilst I'm in no way an expert on skills and skills policy, or indeed on planning, I think those are definitely, as you will have heard I'm sure from others—those are absolutely some of the barriers that Welsh Government is well placed to lead on. So, there is that piece about reducing the barriers and making it as easy as possible, and I think as Andy has alluded to, that focus on customers and consumers is really important. We've sort of done the easy bit of the transition. We've decarbonised a lot of our emissions without anyone really noticing. The next tranche is going to be much harder as we start doing things that—. It's going to involve people changing their behaviour. And so that actually does have a knock-on impact on investment, if investors feel like they're going to be doing something that isn't welcomed. So, that piece around the focus on customer and consumer engagement is really important.

I would say that there are some really exciting areas for investment in Wales. So, as I've mentioned, I think ports and the offshore wind and floating offshore wind sectors in the Celtic sea have huge potential. So, we've had discussions with Port Talbot and with Milford Haven, particularly around the floating offshore wind grants and the support that UK Government has been developing there. We've also talked to the Crown Estate about their leasing rounds and how we can make sure that we are coming in and supporting and facilitating there. I've mentioned HyNet as well. So, I feel that there are absolutely areas for potential for big investment in those areas.

Okay. Thank you. A final question from me, and it ties in with the Welsh Government and hybrid funding questions that I've asked: I was just wondering for your views on whether Welsh Government should be partnering on projects and forming public-private partnerships to share the financial burden and attract investment. Andy.

Again, referencing the idea of having a more locally co-ordinated approach, and these, again, still loosely sketched things that we're calling heat partnerships, we don't necessarily have to think about a public-private partnership being very large scale. If one of the advantages we see in local delivery is that—. One of the things we've heard from home owners consistently about who they trust is that they want local tradespeople to do the work on their homes—they will tend to go to local tradespeople first for advice about what they should do in their homes. So, there's a lot of latent will to tap into local supply chains. You probably would need to first develop small heat installation businesses into medium-sized ones. The model at the moment is that most people are sole traders in this space, including heat pump engineers, but there are lots of benefits to having medium-sized businesses. And if you do that successfully, in the medium term, you could conceive of a local heat partnership that is between, for the sake of argument, the local authority, the energy network operator and a medium-sized heat business, so that you've got that chain of trust between the citizens in a neighbourhood and that medium-sized heat business, the local authority setting direction via the local area energy plan, and then, obviously, a workforce who are going to be increasingly skilled up over time in delivering these schemes locally. And then, again, all of that is a more stable model for finance.

Okay. Helpful. Kate.

I don't think I would be starting from the position of a Government-level partnership, but I think that, certainly, as Andy's talked about, at the local authority level we see more potential for that. So, the Bristol City Leap—their energy partnership is one that we have provided some advice on, and it often gets talked about as being quite an exciting potential model. But certainly, private partnership and good project finance on some of the big industrial decarbonisation and big industrial projects will certainly be essential. So, as we've talked about, the Government setting the conditions for success for those to be able to come in and be a success is definitely vital.

Great. Thank you. Thank you, panel. Thanks, Chair.

Thank you, Sam. I'll now bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. I'm conscious of the time, so I'll stick with Kate, if that's okay, because I'm particularly interested in something that came up in Sam's line of questioning around floating offshore wind. We know the potential that that has, especially in the area of the Celtic sea—important now, of course, with Port Talbot and what's going on in Port Talbot. It's good to hear that some talks are happening, but what exactly needs to happen now to get this over the line? Because I think a lot of people at the moment are looking at the potential for offshore wind, but see it as something that is almost a decade or more away. And, of course, we need a lot of that investment and skills training to happen now. And I'm just thinking about this in the context of the work that the infrastructure bank has done with the Scottish infrastructure bank on some of the offshore wind projects down there. So, just some thoughts on where we go from here will be really appreciated.

Yes, of course. Let me talk a bit about the transaction that I think you're alluding to, which we announced last week with the Port of Ardersier, and then a bit about the similarities and differences, perhaps, with our engagement with Port Talbot. So, in Scotland, the Port of Ardersier did not receive the floating offshore wind manufacturing investment scheme—so, the Government's floating offshore wind development grant—but they are part of a wider free port with the Port of Cromarty Firth, which did receive that. So, we've been talking to the Port of Ardersier. In fact, the Scottish National Investment Bank introduced us into the conversation, and so both of us were having this conversation with the port about what investment was needed. And as a result of that, we and the SNIB both put in £50 million to create a £100 million investment. So, that is actually separate from the grant programme, but it's because when we look—. We have been able to look at this, look at what Government has said are its policy and strategy priorities, look at what we think is needed, and we just think it makes sense. We are obviously taking risk, but we are taking what we think is reasonable risk for the taxpayer with this investment. Because the individual ports in that group will all play a different role in the preparations and then the delivery of floating offshore wind. As you obviously alluded to, there is a huge amount of investment needed here, and it is both in the enabling infrastructure as well as the delivery.

When it comes to Port Talbot, we obviously had discussions there, we offered a letter of support, they receive FLOWMIS grant, which is really positive. Our sense at the moment is that, for Associated British Ports, probably our finance isn't needed. The model is really different, and the ownership and access to finance that the different ports around the UK have are, as I'm sure you will know, very different. So, we will absolutely stand ready, but I think, at the moment, probably on that project we won't be required. But, as you say, there is a huge amount of investment in the area that is required and, certainly, I will come back to this point about that wider requirement for Welsh Government to focus on skills and focus on all the other non-infrastructure enabling pieces that are required to ensure that this investment can be a success.

So, are the Development Bank of Wales and Welsh Government involved in those conversations as well? I would imagine and hope they are.

So, I'm not sure that we've had a trilateral with the Development Bank of Wales on that. Obviously, our ticket sizes and our focus are really different, and I think that's a strength. We shouldn't be planning in exactly the same area. I'm sure the Development Bank of Wales can play a slightly different part. But, obviously, we've got big tickets, I guess, to invest in the infrastructure itself.

So, obviously the infrastructure bank has looked at clean energy as a specific area of interest and specific focus, and you made that clear just now. What other areas of clean energy is the infrastructure bank looking to invest in, apart from offshore wind, then?

Yes, so, you're absolutely right. We think clean energy is going to be our biggest sector. It's partly because, underneath it, there's a huge number of sub-sectors that require big tickets. So, the way we've approached this is that, last September, we updated our strategy and we published sectoral documents on seven sub-sectors, and five of those are in clean energy: so, port infrastructure; heat networks; hydrogen; carbon capture, utilisation and storage; and grid-scale battery storage. And the approach that we take in all of these sectors is to look at, yes, where's Government policy and then where might our finance be needed. And as I said, in each sector, because the needs and the stage of maturity are a bit different, the nature of the product from us that is likely to be useful may be a bit different. So, I talked about CCUS and the fact that I think that big-scale guarantees from us are likely to be useful. When you look at something like hydrogen or heat networks, actually, probably our role is trying to develop the debt market around some of those, because a lot of it, at the moment, is funded on balance sheets plus equity, and we're looking to stretch and mature those markets through debt. So, it's a bit different in different sectors is what I would say.

One thing a number of us here are particularly interested in when it comes to clean energy is the opportunity it brings in terms of empowering communities, so ensuring that actually where there are, potentially, wind turbines going up, where there are hydroelectric dams, solar panels—you name it—that that is actually owned by the community and running for the benefit of the community so that they see the direct benefit then on their energy bills. Are those the sorts of things that you're seeing a particular demand for in some of the investments you're making? And—I'll do a two-parter, Chair, because I'll hand back to you straight after this—in terms of those investments, then, how many of them are actually happening in Wales?

Yes, it's a really interesting question. I don't think we have been approached by any community ownership projects. I would have to absolutely check our pipeline on the local authority side, but I'm not aware that we've been approached with a proposition of that nature. That's certainly not to say that we would reject one if it came to us, but I don't think that we've seen one yet. It may also be the case that, if there are projects of that nature, at the moment, they are beneath our minimum ticket size.

Okay. Just very quickly then on that one—sorry, Chair—has there been any conversation then within the infrastructure bank about actually assessing or looking at the ticket size and then essentially bringing it into line—if that is an issue for community energy projects, that there is a review to bring that so that those community energy projects can then apply for investment from the infrastructure bank? Does that make sense?

Yes, absolutely. So, our minimum ticket size on the local authority arm is set by our shareholder, set by Treasury. On the private side, there's a bit more flexibility. I guess there are two things that I would say on this: one is that we can look at aggregation—so, where there are a small number of projects that might be able to be wrapped together to create a ticket size of sufficient size for us to be able to come in. I guess the other one is that we are always balancing the resource required on an individual transaction versus the scale of what we've got to do. So, obviously, if we drop our minimum ticket size too far, we end up focusing our resource on lots and lots of small ticket sizes, and then we won't get the scale of deployment that we've been set. So, it's a tricky balance.

Diolch.

Diolch, Luke. I'll now bring in Jenny Rathbone. Jenny.

Thank you, Chair. I just need to declare that I have shares in Awel Aman Tawe and in Siemens, just for transparency.

Okay. Thank you for that.

I just wanted to talk about how we decarbonise housing. We know that the coldest homes are in the private sector, and we also know that, I think, four in 10 houses are owned outright by either the landlord or the home owner. So, Kate, how do you think we could accelerate the customer journey you were talking about earlier? Because these people clearly have the money to take out a loan against their asset. What can your organisation do to assist them, given that residential landlord organisations exist? Private home owners are slightly more difficult to contact directly. Is there anything that you've been able to do to engage these people in the climate emergency?

Yes. It's an extremely valid question. I guess what I would say is that we are not set up to be customer- and consumer-facing. We predominantly face into the project finance market, and the skills and the expertise, I guess, that we've been asked to recruit in, we have recruited. So, I hope that doesn't sound like I'm ducking the question. But I guess there are other groups and other bits of the wider public sector that probably are better set up to be able to do that.

Okay. So, bearing in mind that your minimum loan is £25 million, is there any way in which you could envisage partnerships to help tackle this difficult problem?

Yes, absolutely. As I was saying, I think we're likely to start in the social housing sector, which is not the segment you were asking about, but I think is a good place to start in order to prove some models and bring some other investors into this sector to develop understanding and—[Inaudible.]

Okay. We're short of time, and we already have—you know, the social housing sector has definitely led the way. Okay. So, turning to you, Andy, you've made recommendations that the Development Bank of Wales should offer a low or zero-interest loan to home owners for green improvements. Why would you need to do that with this particular group of people, who already own outright the asset they're sitting on?

So, the original impetus for the development bank to do this came from Welsh Government. I think there was an Audit Wales report pointing to the gap in strategy between having affordable warmth programmes for fuel poverty, but then no real offer to private home owners. And then I believe the previous future generations commissioner also pressed them on this. So, we have recommended that they should do it, because what arose from our work was that there was that really clear effect I mentioned earlier, that Government-backed finance actually appeared to increase demand quite a bit. So, if you were asking the question, 'Is it worth the Government doing this?'—you know, 'Government' as proxy for DBW—then the answer's 'yes'; you can see an effect in terms of take-up. But the original steer to DBW to proceed with developing this came from Welsh Government and Audit Wales and the future generations commissioner.

So, I think the other thing to keep in mind—. You've talked about the customer journey—that is the most important bit of this picture. The absolutely headline recommendation we made, as well as, 'Go ahead and do it', was that the finance alone was by no means enough. This comes up in every conversation; it's not a controversial point. I think the opportunity a Government-backed lender has in this space, as well as putting some finance on the table, is to do that piece around advice, support, finding trusted tradespeople, clarifying the options that people will face, at the same time as doing the finance. That support package then also de-risks the investment from any other lender, or for anybody who wants to dip into their own savings and pay for it, or add to their mortgage to pay for it. So, that's the opportunity DBW has, I think, to work with Welsh Government in parallel on those two important strands.

These letters that Sam Kurtz was talking about—most people put them in the bin, because they don't trust an organisation they've never heard of, and there are lots of scammers around. So, how would the local area energy plans help break that cynicism or anxiety to get people to realise that it isn't too good to be true?

Yes. That's a very big question. There's a long, troubled history of well-intentioned initiatives from Government in this space. The Green Deal, not terribly successful, created a very complex market where you were having to deal with anything up to three or four different providers to get your grant or your loan from Green Deal, and that really—. I was working at Citizens Advice at the time, and we saw exactly the scams you're talking about. So, the caution people feel is entirely justified in this space. And I think, again, just comparing the example with Germany, where the KfW scheme has been in place for 20 years and does enjoy that trust, they've taken a very different model there. The front end of that customer journey is the customer's own bank. So, KfW is the capital provider, their own bank is the finance provider, and then they go out to ecosystem and get all the installers. So, there's a model there that can work, but it's a model that took 20 years to build up.

Yes, I'm familiar with the wonderful progress that Germany's made. How could these local home partnerships help to accelerate the process, given that ground-source heat pumps are the most cost effective way of generating renewable energy in homes? It's best done collectively, really, isn't it? Can you give any examples of where that's starting to happen?

Yes. So, again, with the caveat that we're still very much thinking about what these things should look like and keeping it deliberately open—we're trying to co-design them with the people who will end up using them—it's more of a—. We think there's a gap that we're trying to fill, and it very much arose, the idea for doing this project arose, from a collaboration with Kensa, who are a ground-source heat pump manufacturer, and they were trying to understand—. They were able to finance the bit that went in the ground. The challenge was how you get enough homes, the bits that go in the homes, and enough home owners, signing up to a ground loop to justify the investment. You need a certain number of homes upfront; you need to have a reasonable expectation that x per cent of those homes will connect to it over its 30-year lifetime. So, that's a model—

There are lots of place where you could do that; it's just that people aren't, at the moment, doing it, are they?

Yes. Again, this was part of the impetus for it, because you have to have the trade off between pace—. Ground-source is more expensive, and it does have that extra barrier of you need more people to connect to it. It's much more straightforward if you're talking about new builds but, for the most part, we, Nesta, aren't. So, you do need to balance the pace of getting the most efficient option, which would be ground-source in most cases, with, actually, that it might be quicker to just get people doing multiple air-source units in the street.

So, part of the idea behind having the local heat partnership is that you would have a local entity making that decision. So, they would have access to the right information, so it wouldn't be us or anyone else saying, 'Your street should have ground-source'; it would be helping those decision makers to understand, 'Well, why might we want ground-source, or why might we want to go down the route of all air-source units? Why might we want to try and link up with a bunch of other streets and get an external investor, or why might we want to go with a group-buying platform like there currently exists for solar panels, for example?' So, it's not trying to press any given decision onto a local community; it's can you create a local structure, which might only exist for a short amount of time, that helps them make the decision, and then commissions the people who would do it.

So, it's still very much a concept, but it's a concept—hopefully, you'll hear—that I think really could work, but we do need a lot more designing and testing of what exactly it will look like. 

Okay. But, at the moment, you haven't developed any sort of social enterprise, community share models.

No, that's not where we're up to with it, no. 

Okay. So, finally, how does the latest iteration of the Warm Homes programme that Julie James announced in March help your mission?

I haven't looked in detail at the details of the Warm Homes programme—

Okay. But it is more generous—60 per cent of the median average and discounting benefits. 

Yes. So, I was going to say, what I am aware of around the new iteration of the Warm Homes programme is that there is a greater focus on decarbonisation within it. As I'm sure you will know, the criticism of the previous programme is that it had become a boiler replacement scheme—very good for fuel poverty, but locking in 15 years of emissions every time you do that. So—

Okay. We'll probably have to leave the rest for another day. 

Yes. 

Okay. Thank you, Jenny. I'm afraid time has beaten us, so our session has come to an end. So, thank you both for being with us today. Your evidence will be very important to our inquiry. A copy of today's transcript will be sent to you in due course, so if there are any issues with that, then please let us know. But, once again, thank you for your time today. We'll now take a short break to prepare for the next session. 

Debbie Jones.

Bore da, bawb. Good morning. I'm Robyn Lovelock. I'm the growth deal programme manager. I lead on two of the north Wales growth deal programmes—agri-food and tourism, and innovation and high-value manufacturing—alongside colleagues working in low-carbon energy, digital, and land and property.

Thank you for those introductions, and perhaps I can just kick off this session with a few questions. What is your assessment of the progress being made in developing the green economy on Ynys Môn, and what are your key asks from the Welsh Government to support this going forward? Who would like to start on that? Dafydd.

Yes. Diolch. I'll come in as well. I think I would support everything that Dafydd has said. We do have an advantage being here on the island, and actually it works really well, as Dafydd has already alluded to.

I think, from my point of view, a couple of key asks would be if the Welsh Government could be working with the UK Government around the certainty for some of these projects. To create a green economy, we'll need a lot of skills and supply chain development, and it's very difficult to be able to establish that without certainty around some of these projects. Menter Môn are doing a great job with Morlais and the hydrogen hub, but if we're looking at new nuclear or the offshore wind or some of those larger developments, the certainty to allow us, then, as the ecosystem, to meet those opportunities and get the economic benefit would be really helpful. Thanks.

Robyn Lovelock.

Thank you. So, I would agree with the previous speaker, Debbie, that the certainty is key. The mixed messages are challenging for stakeholders, and obviously with the growth deal being a 15-year investment opportunity, we need certainty about the direction, both on Ynys Môn, but also more widely across north Wales, around key developments such as Trawsfynydd and other key energy investments. Obviously, the growth deal is investing in hydrogen through Menter Môn on Ynys Môn, but also further work to support offtakers and understand the supply chain development for that hydrogen will be key. So, in my area of agri-food, for example, greater investment in understanding and support with understanding how the interactions between hydrogen production and demands within sectors, such as agri-food, would be important. And, finally, making sure that investments are delivering the community benefits and not just going to wider supply chains within the UK and internationally. So, we need to keep the benefits within the region. 

And how do organisations on Ynys Môn and beyond work in partnership to help develop Ynys Môn as the Energy Island? Are there any key lessons from your approach that you think other parts of Wales could actually learn from? Anybody on this? Debbie. 

Shall I come in?

Yes, by all means. Yes.

I think it works really well in practice. One of our colleagues always says, 'If you talk to one of us, you talk to all of us.' There is a great ecosystem and network on the island that works remarkably well. It's quite informal, but that seems to work to our advantage. There is a lot of—another buzz word—'collaboratition'. There's a lot of collaborating. Obviously, there's some competition sometimes between partners, but everybody works together. We're all striving towards that same goal. Everybody has their remit, their piece of the puzzle, and everybody works really well together. And so I think that joined-up approach is something that I think could be replicated, because a lot of people, when they come to the region and want to engage, find it quite easy, because as I said you speak to one person and they can then network you out to everybody else, as opposed to having to go in to speak to five different people separately. So, I think that networking works really well. 

If I can add to that. I agree with Debbie, but there are no short cuts to this. At Menter Môn, we embarked on Morlais in 2011 or 2012. We knew nothing about energy. And somebody could question, 'Well, why is Menter Môn embarking on this?' But it was never an engineering issue or an engineering challenge, it really was a stakeholder challenge, a stakeholder management funding challenge. We had been working on Anglesey for 15 years before that, so we had relationships with the council, with the Welsh Government through a range of Welsh European Funding Office European projects. We had funding through the Nuclear Decommissioning Authority, which eventually funded Morlais when it started. We had existing projects with the Countryside Council for Wales, which became Natural Resources Wales. So, all the key relationships were in place when it came to the Morlais project.

It's an obvious thing to say, that we need to collaborate in an area, and I don't disagree with that at all, but there aren't any short cuts to it. So, it's building on existing relationships. And they may not necessarily be in the energy sector, like ourselves, but it's so much easier to work when those relationships exist already and are built on trust and we can build on that. And I think Ynys Môn had this local network, regional network, and then a pan-Wales network as well, and we built on that. And that made developing the project so much easier. 

Robyn, anything to add?

Just, I think, to confirm what has been said, but also to bring in the skills element as well. Collaboration between higher education across the region and further education has been strong and also needs to continue and be further supported as we move into delivery across key projects, making sure we have a strong skills pipeline. We've got the innovation pathways lined up, so that the whole region is there to support the investments on Ynys Môn as well as more widely across the region. 

Thank you for that. I'll now bring in Hefin David. Hefin.

Okay. And can I ask the same question of Debbie as well, please?

I'm not sure I've got too much to add to Dafydd's statement, to be honest. I totally agree that I think that that local content piece is really important, making sure that developers are given not just incentives, but the stick to encourage that local content piece so that we can build the supply chain, and, again, as Dafydd said, working within the ecosystem that we already have, whether that's Business Wales, M-SParc, Menter Môn, the ambition board, to help those companies develop themselves to be able to meet the demands that the projects will give them. So, nothing much to add.

Okay, and, just in case, Robyn, if you wanted to add anything or not.

To add just, I guess, in terms of the supply chain and the innovation pathway—so, really making sure that we're challenging our regional supply chain, our universities and our regional manufacturers to support the development of products that reinforce the sector and its development, particularly paying attention to the need for more circular solutions to the challenges as they arise, making sure that we're not just coming up with short-term solutions, but ideas that are really robust in those supply chains.

Okay. And with regard to planning and consent, planning is obviously a difficult maze to negotiate, particularly where you might have a renewable project that might have some objection. Debbie, you're smiling there; perhaps I can ask you: what's your view of the planning consent process with regard to renewable projects?

To be honest, I don’t have much direct experience in the process. Obviously, I live on the island, so I’ve seen the various issues, maybe, around pylons, around the new solar farm, but I think the thing that I would like to bring in here, which is slightly askew, is the grid. I think there are some issues around connectivity to the grid and, while it doesn’t sit within planning, it does have a really big implication for developing these projects and does make things more difficult and slower, and so I can’t really comment too much on planning, but I think the grid is important.

Okay. Perhaps I'll pass that question to Dafydd then.

Yes, I have to caveat this by saying that I'm not involved in Morlais day to day, but I've obviously been involved for quite a while. We had to work very closely with the regulator, with Natural Resources Wales. So, quite often, with Morlais, we were laying tracks as we were going along. So, we were trying to deliver on Welsh Government policy and trying to see how we could actually make it work in practice. So, we had to work very closely with NRW. One of the challenges we had was the timeline, because, obviously, you had a number of funders providing funding, we had EU funding—that was coming to an end, obviously, last year—and also we had to work with the regulator to achieve consent. And quite often, the regulator will tell you, 'It takes as long as it takes', and you appreciate that, because you can’t predict how long things will take, but, from a funding perspective, it was quite challenging.

But I think we had difficult conversations—they were always very cordial—and I think we developed, through the Morlais project, an understanding within Welsh Government itself and within the regulator on how we can collaborate to achieve this net-zero target in 2050, because the two aren’t necessarily aligned. So, that was an ongoing challenge, but one I think everybody responded to positively.

And as a not-for-profit organisation, are there additional challenges you face and perhaps a requirement to build some social capital around yourself to overcome that?

Yes, massively, because Morlais is a massive project, isn't it? And probably one too big for an organisation such as ourselves, initially. So, you are developing a project that aligns with Welsh Government policy, but you've got the backdrop of running an organisation as we were exiting the European Union. So, you had, in 2023, when we were facing an existential crisis in terms of all the European funding coming to an end—. But, luckily, during most of the Morlais development period, we had that security of European funding as well. But, going forward, our balance sheet isn't—you know, it wouldn't be the balance sheet you'd normally associate with a globally significant energy project. So, having Welsh Government support going forward is critical, and also having Welsh Government almost as a parent company as well, to assume some of the risk. Because, quite often, Menter Môn have to assume a lot of the risk, and, possibly, had we not have the security of the European Union, we may have decided, 'Oh, this is too much of a risk.' But we had to, because, long term, we are looking at the income from the energy project to fund our activity in the community. So, we went all-in with Morlais, but the level of risk we had to take occasionally was probably—. I wouldn't say it's too high, but it was something we had to consider carefully.

Diolch, Cadeirydd.

Diolch, Hefin. I'll now bring in Samuel Kurtz. Sam.

Diolch yn fawr, Gadeirydd.

Sorry, can I just jump in on the last question?

Yes, by all means. Yes, certainly.

Sorry to jump in. It's just to share two experiences from the growth deal perspective, obviously wider than just Ynys Môn and energy, but potentially useful usable to the committee. The two approaches—. The first is that, obviously, planning and consenting is wider than emissions and biodiversity alone, but is increasingly an element of consideration, and Ambition North Wales has brought forward consideration of emissions and biodiversity into early stages of project development, requiring early-stage testing, using benchmarked criteria for emissions calculations to develop a baseline, and then developing that if particular risks are identified. And similarly, for biodiversity, ahead of a net benefit for biodiversity being rolled out in Wales, we've been using a consideration of biodiversity net gain, and that allows those considerations to be brought forward early in the project development process for two reasons: (1) to identify particular challenges and allow mitigations to be built into project development costs to better line-up those considerations and mitigate risks through the planning and consenting process, but, secondly, then to also ensure that the designs are built into the development of the project.

The second piece of work that we're looking at—and this is still under development—is the often overlooked integrated impact assessments; many of those on the committee will have seen these reports and we do feel they can often be last-minute considerations. So, we've brought forward the development of these integrated impact assessments so that we can identify what specific actions are to be delivered by the project above statutory requirements. So, again, we can facilitate early considerations across resilience, across prosperity and equality impacts, Welsh language et cetera, so that they become embedded in the project from the earliest stage, and, again, help mitigate some of the potential risks and capitalise on those benefits through the project development process.

Okay.

Sorry for not bringing you in, Robyn. It was kind of organic, the way we were flowing through the conversation then, but that was an excellent answer.

Diolch, Hefin. I'll now bring in Samuel Kurtz. Sam.

Now, the Welsh Government says that it will face considerable budgetary constraints over the short term. I'm just wondering, panel, how you think it should tailor and prioritise investment so that it delivers maximum benefit from its spend.

Okay, diolch. Robyn, your thoughts on prioritisations of budget, please.

It's a big question and a big challenge. I guess that—. I think recognition of the risks that have been clearly identified at a strategic level that are facing Wales is key, and so I would say, in terms of prioritisation, it's really about thinking about the priority sectors—so, the foundational economy being key, energy production also—and really seeking to identify those intersections for resilience and growth. So, where are there opportunities for growth that will also build the region's resilience? We know that we're going into a period of uncertainty, and so looking to do both of those things to ensure the prosperity, but also recognise that significant challenges are ahead, is key.

I think a second point is around not losing sight of the need for adaptation, protecting what we already have and making sure that it's future fit, whether that be the transport infrastructure or key elements of our industrial production as well. I guess, just to go back to the foundational economy point, I would say energy being key in there, agriculture and food being essential, and then the water infrastructure as well.

Thank you very much.

Diolch. I think there are two things I'd like to raise here. One is I think we need to have a long-term view, which, I totally understand, in political cycles is incredibly difficult to do, but the climate emergency is happening—it's happening—and if we're not thinking really long term and putting in place projects and implementations now, we're going to suffer from it later. I appreciate that the budgetary constraints are today, but if we're constantly looking at things in a short-term view, the budgetary constraints—. We're just going to have to factor in climate change when it's too late, almost. So, I would really encourage a longer term view of investing in these things now. We might not see a return on them now, and that's something we'll have to accept, but also it's something we're going to have to do from a climate change point of view. 

The second point I'd like to make is that I don't think one size fits all. I think maybe that links back to some of what Dafydd was saying. Working with the local ecosystems in whichever parts of Wales we're talking about to see what needs they have and how you can use the infrastructure and the ecosystems that are already there to make that money work harder, in a sense, I think—. Again, that's quite a difficult thing, I appreciate, because maybe it's one legislation for the whole of Wales, but looking at how it could be tailored to meet the needs of different communities and build on the strengths of those communities so that we can maximise the benefits—. I think we've got a lot of what we need to do, it's just those little extra nudges sometimes, which are different for us than they would be in north-east Wales, which would be different to what Cardiff or mid Wales might need. So, having that bespoke element, I think, would be quite useful as well.

Brilliant. Thank you, Debbie, and, sticking with yourself there, you've said that the one way that Welsh Government could maximise the economic opportunities from green economy projects is for it

'to take a more active role in key developments.'

I'm just wondering if you could set out the steps you think it should take to deliver this.

Yes. I'm not sure I've got a step-by-step plan, but I was thinking of this from a nationally significant infrastructure project point of view. To a certain extent, in Wales, we have a competitive advantage. We have the resources that the UK needs to generate a lot of its electricity, and perhaps, in the past, we haven't been able to benefit from that as much as we could've done, so if Welsh Government was in a position to be able to get more involved in these, and it goes back to what Dafydd was saying earlier, mandating that local content, the local supply chains. It's not a guidance, it's not a guideline, it's something that has to be implemented as part of a project. And then you link that back to skills as well and ensuring that there are apprenticeships, degree apprenticeships, scholarships and that they have local office bases so that we can really maximise on the projects that will be coming to Wales anyway—because the wind is here, the solar is here, the tide is here, a nuclear-licensed site is here—but if we can legislate or do something that really gets those companies committed and essentially forces them to have that local content piece, that's how I think we can really start to maximise and draw down on the economic opportunities from these projects, so that they don't happen to us; we want them to happen with us.

Okay. That's really, really helpful. Does anybody else from the panel want to come in on this, on Welsh Government's role in being a sort of enabler of these key projects?

Yes, just to follow up on previous points, actually. At Menter Môn, we're a social enterprise, we employ about 85, with a turnover of about £10 million a year. But it would help us if Welsh Government, like a parent company, could provide or underwrite some of the projects. Because the challenge we have is, if we want to raise capital or go for grants, we are seen as being—we are operating in a risky environment in terms of the riskier projects, and we are a small organisation. So, if Welsh Government could play the role of a parent company, almost, which would enable us, then, to more easily access funding, that would be an ask.

Brilliant. Robyn, anything to add to that?

Yes, a couple of things here. Obviously, Welsh Government and the UK Government are a key partner in the growth deal, and so there is significant engagement and strong ways of working together, which we value and appreciate. I guess I would say that that could probably be taken further, particularly through the assurance process for projects, so we would welcome more robust testing and challenge of project proposals against Welsh Government priorities and strategies, and policies. So, for example, really questioning whether projects that propose decarbonisation—you know, how is Welsh Government expecting and testing whether they will deliver that? An example being recently a research and innovation project, so research and innovation is obviously a speculative process, but how can we be working together, Welsh Government, the growth deal, to really be testing and making sure that those projects are driving towards decarbonisation, really questioning at what point the projects will be carbon neutral, given offsetting of embodied carbon, operational carbon and then the decarbonisation potential of the project.

I've mentioned the earlier testing of biodiversity emissions and equality impacts—that can avoid wasted resources and time. And so, again, we'd appreciate that being strengthened within the assurance process for projects. From a sector perspective in terms of delivery of projects, I think there are significant risks. For example, in the construction sector, the use of new or maybe circular materials or lower impact, lower carbon products comes with significant risks—are there ways that Welsh Government can be investing to support scaling of those products and testing within live examples of projects and underpinning that risk? And then on the skills front, obviously, making sure that there is urgent attention given to the dual transition, supporting the sector to change the way it's working and shift to more green production processes, but also ensuring that the qualifications that new sector entrants will be coming in with are future fit.

That's really, really helpful. Just finally, witnesses in previous panels have mentioned that Ynys Môn would be a great location for a clean growth hub that the Welsh Government have said they're looking to develop. I'm just wondering if anybody from the panel has been involved in any discussions around Ynys Môn becoming a clean growth hub.

I'm happy to come in there, briefly.

Yes, by all means, Debbie, please. Thank you.

I haven't heard the conversations, but I would argue that we sort of already are one. With all of the activity and everything that's happening here, and the co-ordination, and the way that we work—. Obviously, that's not to say we don't need that additional support, but I think that it's already mostly here, through the way that we work.

Okay, brilliant. Thank you. Robyn.

Can I add that I agree with Debbie? Ynys Môn is doing great there. I would also say, looking more widely across north Wales, that it's easy to think about a green growth hub being tech-focused and energy-focused, which is valuable and a critical component, but also, as we are looking for a green economy, it's making sure that we keep equal importance on rural economy aspects of the green economy transition. So, discussion of how we are supporting the wider north Wales economy to be a green growth economy as well, with an emphasis on traditional skills in agriculture and food production. 

I will now bring in Luke Fletcher. Luke.

Diolch, Gadeirydd. If I could focus in on skills, and I will start with Robyn, if that's okay, given the previous comments around the need to transition certain sectors over to greener ways of doing things. We are seeing the importance of that now, really in its starkest terms, in Port Talbot, aren't we—the need to prepare future workforces. One of the challenges that I think we've seen in doing that is actually identifying those sectors that we can essentially use those transferrable skills in. So, I'd be really interested to understand, from a north Wales perspective, where you see some of those gaps in north Wales or Ynys Môn. Which sectors are those skills gaps in and, essentially, what do we need to plug them? 

Thank you. I think that that's a key question. In terms of the process for identifying how to make that transition, I did share in my written response a link to some work by the New Economics Foundation, where they've done some work in the Yorkshire and Humber region on really mapping out the specific jobs at risk, and mapping out where those skills can be transitioned. I would really recommend that as the best example that I have come across of that kind of planning—you know, the depth of planning.

In terms of north Wales, the kinds of sectors that will need particular consideration are changes within the construction industry, as we have touched on, and making sure that materials and ways of working are reduced in impact, and maybe also recognising that, given the impact of embodied carbon, it is about looking at assessing really whether the level of construction can continue at the rate that we currently see in the economy, or whether that needs looking at. At the moment, construction employs a higher percentage of people in north Wales, compared to the rest of Wales. So, that's a critical consideration there. 

Then, obviously, on agriculture as well, we have a higher proportion of workers. In terms of what's needed, it's very much understanding on a job-by-job basis. I do think that, to create the green economy that we are aspiring towards, we really need to look at every sector within every business, and bring that perspective forward, so that businesses are looking at a whole-system approach to reducing impacts. I think that, as a starting point at a sector level, the Yorkshire and Humber analysis was very impactful. 

So, the body of work that would need to be done, then, needs to be done through a partnership between sectors—

I haven't yet seen that kind of analysis for north Wales, or anywhere in Wales yet, so I would value that, if that could be—.

So, a sort of workforce strategy, say, by Welsh Government, would be very welcome, then, because that, potentially, would be a path to resolve that.

I think, without that core analysis of what the job transition needs to be—. There's been a huge amount of work on the net-zero pathways and skills transitions, but we're missing that piece at the moment, from what I've seen, in really identifying those particular jobs at risk, and who the people are that are going to need to transition, and really focusing attention on those transitions.

In terms of the effect of the skills gaps currently there, what sort of effect is that having on investment from outside of north Wales, then, into north Wales, or even investment of north Wales businesses in their own operations? Because, obviously, if you have that skills gap, there's that reluctance, potentially, then, to invest in your business, to grow it, because you're not sure if you can even get the people in to do the job. 

I think it's a real question. So, you may be aware that Ambition North Wales has put in place targets for reducing embodied carbon—40 per cent reduced embodied carbon—in the construction of its projects, and net-zero operational emissions and a 10 per cent biodiversity net gain. And so that's something we carry through into the procurement demands of our growth deal projects, hoping to incentivise the construction sector, design and infrastructure design sectors to respond and skill up in those areas, but we are seeing a gap that businesses aren't yet able to come forward and deliver in in every case to do what we're looking to do.

There are different ways of delivering against those targets, and we're seeing less on the innovation side at the moment and more on managing processes. So, we would really welcome that skilling up in different materials, underpinning the risk of using those new materials, and that kind of thing, to reduce impact. At the moment, we do face a risk that, if our regional businesses can't deliver to the requirements, then the businesses that can, maybe from elsewhere, would be coming in to deliver against those targets, and that would undermine our intention with setting them in the first place.

I imagine, just based on the written evidence that we've had, that one of the frustrations with all of this, with those missing pieces, is that you have a number of young people in particular who are leaving north Wales because of their perception that there's either not enough jobs there, or not enough well-paid jobs, so the importance of getting that missing piece in place is, I think, actually shown in there. I can see Debbie nodding. I'm not sure if you want to come in on that, Debbie.

Yes, absolutely. I've got a lot of things to think about and say around skills. It is quite common in the region for this narrative around people having to leave to get good-paid jobs, whether that's leaving to go to the north-west, your bigger cities—Chester, Liverpool, Manchester—or whether it's to leave to go down south, to Cardiff. Just a personal example: I grew up on the island, and when I was applying for university, the school said, 'Don't bother applying to Oxford and Cambridge, because people from north Wales don't go there; they don't get in there.' So, there is this inherent narrative. And I think work has improved. We are doing a lot to try and combat that. Menter Môn do a great job, Ambition North Wales and the local HE, FEs and M-SParc, going out into schools to really encourage children and young people that there are opportunities in north Wales and that studying STEM subjects will lead to a job—that there are jobs here. However, the counter to that is that it's sometimes difficult to point at what those jobs are. We do have to still talk in a hypothetical way a lot of the time. If I'm talking to a 16-year-old now and they say, 'Okay, well, I'll go and study engineering, where's the job?' And I'm like, 'It's coming soon.' So, it is quite difficult to encourage it, because that final end point isn't there.

But I think, just to go back a step, in terms of the gap as well, it's an interesting point. In M-SParc, we have about 52 tenant companies, and over the last 12 months, we've seen quite a few companies within the energy sector move and base themselves, or have an office base here, because of the opportunities. So, it's been really, really great, but they are now struggling to recruit. What we're finding is that they're really struggling to recruit engineers. We had Westinghouse, for example, come and set up their nuclear decommissioning hub out of M-SParc, because of the opportunities with the Trawsfynydd site and the potential Wylfa opportunities as well. They had a plan to recruit 15 people to work in that office, and signed a lease for a large office, and have managed to recruit about two. So, while, in the short term, it's not necessarily a problem because they are here, I think in the long term if we can't buck that trend, and can't work to get people into those positions, there is a risk that they will move back out of the region. They could move to somewhere like Chester, where in theory the pool of people who could work there is larger, but it's just over the border. It's close enough for them to commute in and be able to work on those sites, but it's just over the border, and so we lose that economic value from those jobs being locally based.

Again, I think we saw that with the Horizon project. The HQ was in Gloucestershire, not based on Anglesey. I know they had a site in Oldbury as well, so there's a bit of sense to that, but I think what we really need to do is really work with the regional skills partnerships, the local HE, the local FE, and that wider ecosystem, and as Robyn said, fill in the gaps as to what exactly the pipeline is, and what we need to do to make sure that we can encourage companies to set up their HQs, have all of the jobs based here, and not feel that they can't come to the region because they won't be able to employ. I think we're on the cusp of that risk at the moment. It's not quite there, but I think it's coming, if we can't sort it soon. 

This is a bit of a long-term project, isn't it? Because you have to start quite early. I'm thinking of Hefin David's report he did recently on skills, and it's very clear in that report that the earlier you start, the better chance you have of actually influencing people to go into sectors locally. Because a huge cultural change has to happen, not just in north Wales, but across Wales. I'm just thinking about me now, being a boy from Pencoed in Bridgend; a lot of the boys I grew up with have gone to London, they've gone across the border. I know some people who've gone to Australia or New Zealand. This is a trend that we have to buck across Wales.

In that sense, again, trying to take the evidence you've given today now, it's about having a particular workforce strategy in place so we can identify exactly what these jobs are, because we're seeing that problem now in Tata Steel, where people are leaving Tata Steel and taking up jobs across the border, because there's more clarity over what's happening there. But it's also looking at some of those recommendations that Hefin David has made in the past—actually going into an education setting at an early stage to try and motivate people and to show the potential in those areas through meaningful work experience, meaningful careers advice, and so on. Is that a fair analysis of what we've been discussing this morning?

I think so. I think the national curriculum, the new changes to the curriculum in Wales, have actually been quite helpful in that one. From M-SParc we run a series of programmes now with local schools where we focus around those four key pillars of the curriculum, and some of that is around role models and engaging with industry, and so we have been able to set out programmes. We have one in energy where do go to local employers and start to show children in primary school some of the jobs and some of the opportunities that are out there, whether that's with Morlais or with the nuclear decommissioning or with RWE, so they can start to see. There's this phrase, 'If you can't see it, you can't be it', so it's about raising the profile of the fact that these things are here, but also that we need to have more of them so that we can really direct everybody to it.

Can I make a quick point, please, Chair? Just to highlight to the committee that there is a session in the Welsh Affairs Committee that's taking evidence on this as well. So, there's a whole body of work being done that may be of interest to this particular question. 

I think there are two particular points for me that are critical. One is on the consistency of funding. You've heard from Debbie and Dafydd of the importance of going into schools and talking with young people, but the funding for that kind of work, particularly at the moment with shared prosperity funding, is very short-term, year on year, and it's difficult to build that consistency of message. How can young people be trusting that those jobs will be there if we're not able to go in and talk about them year on year in that way? 

The second thing is on career pathways. I know from discussions with Careers Wales that they have to be sector neutral, and respond, obviously, to young people's interests. But is there a question that there should be maybe some prioritisation of their discussions with young people? Not to stereotype, but I know that, for example, hairdressing and beauty remains extremely strong. Is there an opportunity there to be supporting some of those young people into the sectors that we know are going to need more people, and to be getting that transition across early and prioritising those key sectors for the region and for Wales more broadly? 

Thank you very much for that. I'll now bring in Jenny Rathbone. 

Thank you very much. I wanted to explore local supply chains and how you're managing them. Before Anglesey Aluminium closed, did you capture the generated heat for warming homes or any other use nearby? No. Nothing happened on that front. Okay. A missed opportunity. So, are your swimming pools still heated by carbon fuels? Yes. Okay.

I just want to look at food now, because, obviously, Anglesey is famous for food. Ambition North Wales, in your paper you highlight the potential for increasing production of Welsh fruit and vegetables into public sector procurement to support the agriculture and horticulture supply chains. I wondered if you could just explain why you haven't been crawling all over this for some while, given that we have a real food security problem around fruit and vegetables in Wales.

Thank you for the question. I absolutely agree that it's a critical question for food security, and I think also more widely for the health of our population, our young people in particular with free school meals and also the implications of our current system for biodiversity. I think there are real opportunities to be looking at this area in a joined-up way. In fact, I've just led a piece of work that's a systems-led review of agrifood in north Wales, which is the first step for more joined-up working. That's been funded with support from the Welsh Government, but also, critically, from Betsi Cadwaladr and contributions from the six local authorities. So, there's really a recognition, I think, from all those bodies that this does need work.

I think the reason that maybe we're behind the curve on there is that Food Sense Wales has been doing a lot of work on this area for some years, but I understand has struggled to engage in north Wales. I don't know so much about the reasons for that, but the first awareness I had was when the food partnerships funding was available, and it was highlighted to me that there were, I think, only maybe one or two applications expected from north Wales a week before the deadline. And so, we were able to mobilise across our networks in the growth deal, and secure funding for six food co-ordinators, one for each local authority, and then have been hosting bimonthly round-tables of those food co-ordinators, which has led to this piece of work.

In terms of what I think is needed, I think one of the elements of the piece of work that has come out is that I think there remains a lack of clarity at a national level. We want to support the national-level visions, but there's a lack of clarity on the food future that we want to be heading towards. There's been a number of food future scenario pieces of work, and there are still options and choices, compromises, opportunities that need to be ironed out, so we would appreciate the urgent publication of the mapping that I understand has been done—

Sorry—the publication of what?

—of the national strategies. I understand, during the food Bill debate, there was commitment from the then First Minister Mark Drakeford to do a mapping of national strategies related to agriculture and food, and to show where there is a joined-up vision. I've not seen that; I don't know whether it is available. But it would be great to see that, and then working towards, as I know 'Cymru Can', the work led by the well-being commissioner, is doing, really moving towards more joined-up working across those key sectors.

I think there are very practical things that need to happen: a mapping of horticulture production by region, really looking at the enablers and barriers, and linking into regional and local planning discussions; really looking at our protein production for human and animal consumption; and ensuring that we don't undermine biodiversity targets as we look to scale horticulture—so, emphasis on organic and/or agroecological production. I think there is a huge opportunity that I know Vaughan Gething has been behind previously, and would appreciate renewed support for, looking at the power of public procurement, with the changes coming up in October to procurement rules for hospital and school meals, really looking to increase the proportion of vegetables and fruit that we're capable of producing in the region—

I'll stop you, because you're telling us things that we've actually legislated on. I want to know what has been done. I think, Menter Môn, you've had some money to try and improve the public procurement supply lines into north Wales schools. Am I right? I'm not quite sure where this money comes from, but could you elaborate?

Yes, that's Backing Local Firms. We're working with six local authorities to increase the amount of local ingredients on school menus. That involves working with schools, with local authorities, with chefs, to identify how we can increase the local content on menus and thereby strengthening the local supply chain. That work is ongoing at the moment. I don't remember the—

When was that money granted and where did it come from?

From yourselves—it's Backing Local Firms.

From the Welsh Government, you mean? Okay. And how much was it? Don't worry, you can write to us if you can't remember. That's fine. What about on Mam Môn itself? How much of your local fruit and veg production goes into meals on Anglesey?

I couldn't tell you off the top of my head.

Because Mam Môn is the centre of horticultural production in Wales, so why are we not using this unique selling point to really drive this, and how come we haven't done this up until now, given there's a real food security problem and child poverty, health problems, et cetera?

It has been something Menter Môn has been very involved with for many years, through the LEADER programme, so working with farmers to enable them to diversify, to increase the breadth of their produce, and most of that was funded through European funding grants. Obviously, then, you have Cywain, you have Farming Connect, who also come in here as well, and we've worked with producers. A lot of that produce historically tended to be fairly niche products, whereas if you are going after the food resilience agenda—. You need to obviously consider your Halen Môns and your pastramis, et cetera, but you need your everyday produce and you need them on the menus within local authorities, within schools, within the health service. That way you're supporting the agricultural sector, but also supporting the general supply chain, the producers and the suppliers, et cetera. And we have had money through Welsh Government, through Larder Cymru, and that is now going to be continued through Business Wales as well, which we're a part of. So, efforts are being made. One issue in terms of procurement is scoring social value. So, where the council goes out to procure, it can actually score the fact that produce is produced and supplied locally, and the carbon footprint is also considered within that as well. So, efforts are being made in that direction.

Okay. So, what are you doing to get horticulture producers to collaborate, so that they're not all producing, say, broad beans that all come on the market in the same week?

Well, we're also involved with the food partnerships that were mentioned previously. That funding runs until the end of the year, but part of that is to increase food resilience. At the moment, there's a danger that the whole narrative turns around food poverty, which is an issue, but what we need to look at is food resilience as well, which goes beyond, obviously, food poverty. I don't have—. Obviously, I prepared the notes on the energy side of things—

Okay.

—but we will expand on that, if that's helpful.

Okay. Perhaps you could write to us. I'd like to know the level of engagement with the different caterers or procurers of school food, so that we can start to see how it's starting to change the agenda.

I'm just going to jump in and answer that question, if I could just—

Yes. Robyn, yes.

—add a comment on that. I would say that the level of production is extremely low. As you're aware—

Even on Menter Môn? Even, sorry, in Ynys Môn?

I think the first effort to map this has been from the food co-ordinators that have just been brought on in the last year, so they now have done a mapping, but the scale of production is not significant and there's still a lot of work to be done, to do the linking that you've just talked about. So, the key outputs from this research that we've done are to amplify those messages across partners, so that more linking can be done and there's more joined-up working. So, the next step on that is communication to the different stakeholders to facilitate that linking and bring people together around the issue.

Okay. Well, perhaps we can talk further on this another time.

Could I just turn to Debbie? In your written submission, you talk about the current community benefits scheme not being adequate to deliver the economic impact locally that's desired. Sticking with food, how are you developing those local community food partnerships, developing people's understanding of cooking food, all those sorts of things, to improve public health? And then, obviously, any other aspects of this that you want to tell us about.

In terms of food, it's not an area that M-SParc works in. We're heavily reliant on grant funding, so we tailor our interventions around the expertise that we have in house and the activity of the region. So, we predominantly focus on energy, digital and your general business support, so I can't comment much on food.

Okay. Fine.

But in terms of the broader statement around the community benefits scheme, from an energy point of view, I think there is a tradition that—and please correct me if I'm wrong; I know Dafydd will know a little bit more about this—there is generally a scheme where you will get a certain amount of money for the community per megawatt, based on some of these larger projects, and that will go into a local community who will invest it in, perhaps, new kits for their football club, they might sponsor local things, and I just don't think that that system is adequately reimbursing the host communities. I think it goes back to the earlier conversations we had about embedding local content into the discussions, local skills, local opportunities. Yes, it's great that the really localised community has a pot of funding to help their community, but we need to look at it more regionally, for both the island and north Wales, and really maximise the jobs and the supply chain, and that's where I think we'll see that bigger economic growth.

Okay. So, I absolutely understand what you're saying, because this isn't about refurbishing playing fields, and I don't think you could rely on community councils to be able to lead on decarbonising the homes in the area, so where is that leadership going to come from?

I think, a mixture of places. I think the local authority has an important role to play, because they have that overall view, but I think there needs to be stakeholder engagement more widely, with groups like Ambition North Wales, Menter Môn, M-SParc. If you're talking homes in particular in north Wales, you're got the Adra Tŷ Gwyrddfai project, which is looking at the retrofit. So, I think it needs to be co-ordinated by, maybe, a local authority who have that view, but it needs to really make sure that it's engaging with local stakeholders who can lead on some of the more specific interventions and provide the additional expertise that is required.

Okay. So, what engagement have you had with—I think it's called Ynni Cymru—the Welsh Government's national energy body?

Yes. So, Ynni Cymru, they're based in M-SParc. I know that they're still establishing themselves and have only recently appointed their director, who was in M-SParc for a conference yesterday. So, I've had good relationships with them and the team, but I know, from what I understand, that they're still in the early stages of having discussions. We've got a good working relationship and we'll continue to have meetings with them to understand how we can support Ynni Cymru in their ambitions going forward.

Okay, but this is urgent. We've got a fuel, energy crisis, and a climate emergency as well. I'm glad you've got good relations, but when are we going to start seeing some concrete plans to enable you to start bidding for these community energy benefits that, at the moment, are going to waste? Well, I mean, they're doing small-scale things, but they're not using the opportunities that are on offer.

Yes, I think there are wider issues. Having Ynni Cymru in place is great, and having the ecosystem, but I still think it goes back to broader issues around the grid and around funding that still need tackling, and I know that Ynni Cymru will be—

The grid, in Anglesey? Surely that's one of the places where you do have the grid.

Okay. I'm very conscious of time. We have run out of time, so very, very briefly. I know that Dafydd would like to come in, and Robyn, but very, very briefly, I'm afraid.

Yes. I think we need to move away from this concept of community benefit. We need local ownership, and where Government could help would be forcing that agenda. There is a policy there that talks about 20 per cent local ownership of energy schemes, but how is that achieved? Is it a grant from Welsh Government? Is there a community share offer? Does the developer give 20 per cent? We are working with Ynni Cymru on potentially the ownership of a solar park. We have engaged with the major solar developments on Anglesey and we are pushing this agenda, because the community benefit isn't part of that planning process. I understand why, but then what they offer is really small. The benefits come from local ownership, and we have to work with you, with others locally, to ensure that there is a sense of ownership—not a sense of ownership, but that there is actual ownership of all energy projects in a local area. That's how you maximise the supply chain opportunities, the skills, the income, and the sense that energy is being done with the community, not to the community.

And finally, Robyn.

Thank you. I agree on the core benefits, the core procurement element, and the importance of that versus the social value of procurement being enough to rely on. I think, just to respond to the question about leadership, the report that we've produced suggests that the CJC, the corporate joint committee, could potentially have a leadership role across local authorities, because it's tasked with economic well-being, of which food is a key element, as well as energy being a piece of that. And then, obviously, planning, which is a key barrier at the moment to scaling horticulture production, so there are opportunities there as well that are obviously within the local authorities and their leadership there. Just in terms of the link between food and energy, I just think it's important to also highlight that food is only mentioned twice in the regional energy plan, and so there is more work to be done to understand the need for energy within the food system more broadly, whether that's agriculture, horticulture, production or manufacturing, et cetera.

Thank you.

Okay, thank you very much indeed. Our session has therefore come to an end. Thank you for your time today. Your evidence will be very important to us for our inquiry. A copy of today's transcript will be sent to you in due course, so if there are any issues with that, then please let us know, but once again, thank you very much indeed for being with us.

Diolch. Thank you.

Thank you.