Economy, Trade, and Rural Affairs Committee

Croeso nôl i gyfarfod o Bwyllgor yr Economi, Masnach a Materion Gwledig. Symudwn ni ymlaen nawr i eitem 4 ar ein hagenda, sef ein hymchwiliad i'r economi werdd. Dyma’r sesiwn dystiolaeth gyntaf ar gyfer ein hymchwiliad i'r economi werdd, ac rŷn ni'n siarad â chynrychiolwyr o'r sectorau busnes ac ynni adnewyddadwy. A gaf i groesawu ein tystion i'r sesiwn yma? Cyn ein bod ni'n symud yn syth i gwestiynau, a gaf i ofyn iddyn nhw i gyflwyno eu hunain i'r record? Ac efallai gallaf i ddechrau gyda Felix Milbank.

Bore da. Fy enw i yw Felix Milbank, a dwi'n gweithio ar gyfer Ffederasiwn y Busnesau Bach, a fi yw'r dirprwy bennaeth polisi yma yng Nghymru.

Ben Burggraaf.

Good morning. Thanks for having me again. I'm Ben Burggraaf, and I'm the chief executive officer for Net Zero Industry Wales.

Jess Hooper.

Bore da, bawb. Diolch am y cyfle heddiw.

Good morning, everybody. My name is Jess Hooper. I'm the director of RenewableUK Cymru.

And Tom Hill.

Good morning, everyone. Tom Hill, programme manager for Marine Energy Wales. For those of you who don't know, Marine Energy Wales is the industry representative body for floating offshore wind, wave, tidal stream and tidal range industry sectors in Wales.

Thank you for those introductions. I'll kick off this session with a few questions. What is your current assessment of the Welsh Government's approach to the green economy? Who'd like to start on that?

I'm happy to take the first go.

Yes, Jess, by all means.

So, I think, as a sector, we're quite intrigued by some of the approaches that have been taken. I think, economically, renewable energy represents a significant opportunity to Wales as part of the wider UK; we're in a global leading position. Some of the activities, however, that we're seeing from Welsh Government are potentially undermining that position, and if we don't see fairly significant changes in some of the policy that supports energy, in particular onshore wind energy, we're going to fall short of some of our targets that we see, we're going to miss out on the opportunities, and I think, fundamentally, we'll miss out on an opportunity for the onshore wind sector to provide a runway to the offshore.

I think it's worth noting that the opportunities that we are seeing in terms of offshore, so the Celtic sea opportunity for floating wind is well recognised, well documented and well supported, but we're not going to realise that opportunity most likely until the early 2030s. We've got six years, seven years if you count this year—six years, sorry; my maths is off this morning—to fundamentally really drill down and deliver on energy delivery in that short term that can contribute to economic growth, our net-zero ambitions, jobs, skills, supply chain development, and we really need those anchors placed now in order to be able to deliver through the 2030s for offshore as well.

Okay, thanks. Anyone else on this? Felix.

Yes. I was just going to say that the Welsh Government have been very proactive as a partner in terms of promoting 'the green economy', methods of active travel, and they've definitely set a very good standard in terms of bringing about the Well-being of Future Generations (Wales) Act 2015, which has actually led the way on an awful lot of international conversations. But I would definitely agree that Welsh Government have failed to deliver a vision that is able to resonate, I would say, with SMEs in particular. Quite often, SMEs, from what we're hearing, feel as if an awful lot of these decisions are being implemented on them, rather than Welsh Government necessarily trying to work with them on trying to make sustainable transitions, and that's something that we do have a deep concern on.

We are hearing from FSB members across the country, here in Wales, about their work, their anecdotes, and what they're trying to do in terms of sustainability, trying to adopt greener methods of how they use their energy resources. And given the space, SMEs can do some fantastic work, but there definitely needs to be a far more cohesive and joined-up strategy between Welsh Government and the SME economy here in Wales.

And which green economy sectors do you think Wales has a comparative advantage in, and to what extent are we making the most of potential opportunities in these sectors?

So, I would definitely agree that the renewable energy sector has been something of a gold standard of late. We have seen a good amount of foreign direct investment—a good amount of foreign interest in the opportunities for renewable energy here in Wales. But on an SME level, we have some fantastic companies, such as Câr-y-Môr, which developed their initial product for the market to become that of innovation to try and improve pharmaceutical solutions. There are an awful lot of sectors, where I think Welsh Government are exceeding and where Wales is exceeding, I would say. But like I said, I think it's more about focusing on how we can ensure that these different successes are joined up and that there is a cohesive strategy for the long-term future.

Okay. Anyone else on this? Tom.

Yes, I just wanted to come in, obviously, you've got to remember that Wales is a coastal nation, is a marine nation, so we've got an advantage on anything to do with the sea. So, yes, I think we have got an advantage to get more involved in the tidal stream technologies. Obviously, you've got the Morlais project, the first ever tidal stream demonstration zone, there in north Wales. But, yes, there's a lot of opportunity within the other sectors: tidal range and wave energy as well. We've got the second-largest tidal range in the world in Wales, so, I mean, that's an advantage in itself. So, yes, we should really look at the resource that we have around the coast of Wales as an advantage.

And how can the Welsh Government bring economic benefits from the green economy to all areas of Wales? Are there any areas that will require particular support to transition to a green economy, and if so, how should these areas actually be supported?

Just to link, if I may, the question before with this question, on comparative advantage, Tom mentioned there our marine access, and I think, fundamentally, ports and maritime are quite a strong arrow in our quiver, and something that really, really offers us a lot of opportunity both for, in the short term, onshore wind, as I touched on in the first question, but also then the offshore. So, investment in our ports and the maritime link-up that we've got there are a fundamental area that we need to be looking to.

We've obviously, this week, seen the floating offshore wind manufacturing investment scheme announced from the UK Government. It's fantastic that Port Talbot have secured a position there on the primary list. It's very disappointing to see that Milford Haven missed out. And I think, fundamentally, looking to our coastal peripheral areas and enabling the delivery of some of the renewable benefits to these regions is fundamental.

We've already seen substantial funding coming through, obviously, through European funding, historically, but also then through the city deal and growth deal. So, both Swansea bay and the north Wales growth deals have focused in on aspects that can deliver for both of these sectors, bearing in mind that the ports are not only a gateway for our supply chain to get kit offshore, but they're also the gateway for us to bring kit for the onshore development in.

So, developing a pipeline that considers all of these aspects, I think, is going to be a fundamental requirement going forward, and having a pipeline of projects that segues from onshore to offshore will enable our supply chain, our SMEs, to invest with confidence that there's business there for them to be secure and that they can count on recuperating that investment over a long period of time, rather than it being quite stop-start.

Ben.

Thank you, Chair. I just want to comment on some of the questions. I just want to link them up together, because I think, in my view, they're all linked. I'm personally not a big advocate of the term 'green economy', not for the principle of it, but actually because it suggests that certain parts and certain sectors are not part of this economy going forward. And you can talk about agriculture, you can talk about industry, and particularly the big emitters that are currently within my industrial members and within the industrial clusters, and I do believe strongly that they are part of a green economy going forward.

I think that focusing on green sectors does actually perpetuate the current trend we're seeing of de-industrialisation across the UK, but also in Wales. And I do think there is, first of all, a need to stop that de-industrialisation because we need that industry; we need those primary industries—the goods and services they produce—to build the floating structures, to build those windfarms, to build all of those structures that we need to actually get to net zero, whether it's cars, whether it's wind turbines or those elements that Jess and Tom already talked about.

So, I think, for me, to focus just on the green economy is possibly sending out the wrong message. It's an economy in Wales, full stop, that needs to transition to a net-zero world—

Yes, so, you'd call it something else then rather than 'the green economy'. What would you call it?

I would call it a Welsh economy that needs to transition towards net zero, rather than calling it a 'green economy' full stop, because I think what we call green sectors is the question. And there's a similar thing around 'green jobs'. I don't like 'green jobs' either, because there are, technically speaking, certain individuals who are working in a petrochemical refinery or who are working in a power station, or working for Tata Steel for that matter, who are heavy emitters, and that suggests that those jobs cannot be green in the future, but they are fully transferable, those skills, between those parts. So, I would like to challenge this notion of green jobs and green sectors, because it suggests that certain parts of the economy cannot transition to net zero and, as such, we're sending the wrong messages, I think, to future generations, that there's no future in those kinds of jobs. I think there is a counter-factual there: there is actually a future, there is a clear plan to transition to a much greener industrial sector in Wales, but it takes a bit of time, and that time is needed to build up the renewable resources needed to power again that industry, going forward, in the same way that coal did.

Okay. Thanks. I'll now bring in Vikki Howells. Vikki.

Thank you, Chair. I've got some questions around supporting businesses and industry to decarbonise. I've got three specific questions to direct to three of our panel, and, Tom, if you want to come in at any point with a perspective on marine, obviously just raise your hand and I know that our Chair will bring you in. So, my first question is to Ben from Net Zero Industry Wales. You've already started to outline some of this for us, Ben, but your paper covers the five-step transition for industry in south Wales to decarbonise between now and 2040, so what support do you feel will be needed from Welsh Government to get this started?

I think, first of all, it's important to recognise that they already get fantastic support from Welsh Government, because the now First Minister, Vaughan Gething, in his previous post as economy Minister, created Net Zero Industry Wales at the request of the south Wales industrial cluster. And we do get a lot of support in that. In that support, I think firstly what is needed is that Wales itself as a nation gets a clear ask into UK Government about what it needs from a revenue perspective and revenue support, because those levers are fully reserved to UK Government. I think we need to be working much more closely between Government and industry, and be clearer about what we actually need from UK Government to deliver the potential in Wales.

So, just to give an idea, just to give the scale of where I think there is a bit of unfairness around this, we have 10 to 15 per cent of emissions in Wales, but we have hardly any of the UK emissions trading scheme revenue, which is now up to £15 billion, which has been collected into the Treasury from May 2021 up until now. And hardly any of that has been recovered. The European Union has earmarked 50 per cent of that to actually support the decarbonisation of industry. There is nothing like that in the UK. So, we need to be much clearer about how we do that. There is a very clear policy from the Treasury to say, 'We'll not have hypothecation, of ring-fencing some of these', like the EU does, but what we do need is then to say that, if there are support mechanisms for floating offshore wind, onshore wind, we talk about hydrogen deployment, carbon capture and storage technology deployment, CCS—there's £20 billion that has been announced last year by the UK Treasury; we should get our fair share of that pot of money and revenue, which is at least 10 to 15 per cent, in my view. So, I think that's what we need to be clearer on, and working much more closely between Government, Welsh Government, and the sector here, sectors across Wales, to create a much stronger unified team Wales call to that kind of policy port. I think Scotland and other nations are doing that better than us.

Secondly, I think, when we come to Wales's devolved powers, there are a lot of powers actually in Wales, particularly when it comes to planning and consenting, and, because it's different in Wales to other places, it's often been perceived by companies coming into Wales as being difficult. Actually, what we should be doing in Wales, because we're a small nation, with only two degrees of separation, we should be actually using those levers that we have fully devolved to our advantage and make Wales a much more investable place by not deterring them from investment, but actually encouraging them and making those levers our advantage. And stop dwelling on the mistakes of the past, but actually use the Well-being of Future Generations (Wales) Act 2015 as a way to look forward and actually take it as a basis, a foundation, to create much stronger private and public sector partnerships. So, I think moving into an area where you link the earlier statement about clear asks to UK Government, have, then, also a clear strategy when it comes to devolved powers, and creating sector-type deals that are outcome driven, I think are the solution going forward.

Thank you. And if I can ask Jessica now. So, RenewableUK Cymru, you called for Welsh Government to set a clear delivery plan for reaching the 100 per cent renewable energy target by 2035 in order to provide certainty for investment. So, can you tell us what you would want to see in this plan to give the sector the assurance needed to invest?

So, fundamentally here, we're looking for a pipeline. We want to be able to be confident in the pipeline that's coming down the road, and that in itself will enable that investor confidence that Ben has just touched on in his response. As a sector, we're keen to see a road map, delivery plan and a review process, crucially, which enables us to check back on how we're delivering against that delivery plan to reach the target of 100 per cent of electricity demand to be met by renewables. I think that will provide great clarity on the ambition that we have here in Wales and enable that ambition to be realised. So, we're looking for an outline of the long-term ambition, and that needs to be across all technologies. So, we support a diverse and resilient energy mix. We're looking to onshore wind in the short term, as I've mentioned, then, offshore, supported by those sectors that Tom is here representing from a marine point of view. So, we'd then like to see that those technologies have potentially specific targets for delivery against a time frame with progress stage gates, including key initiatives approaches and solutions that we can bring forward to address potential hurdles that come into play in terms of affecting our ability to deliver.

So, two of those main constraints are probably consenting and grid. We appreciate completely that grid is somewhat out of Welsh Government hands, however, the convening power that Welsh Government have, and to Welsh Government credit, some of the work that they have been doing—. So, the 'Future Energy Grid for Wales' report, which was released probably about six to 12 months ago now, that sets a really clear foundation for this, and, looking to Nick Winser's report and how we can dovetail with that, I know there's a hope, an aspiration, that we can potentially have a pilot in Wales to deliver for that. I think in order for us to really see delivery associated with that, we need interconnectors—so, connection between the north and south Wales grid lines, we need enhancement of grid around that, and it needs to be clear what time frame we're anticipating that that can be delivered to.

We'd also then like to see two taskforces—so, an onshore-focused one and an offshore, made up of decision makers, Government officials and industry representatives. So, again, sort of reflecting on the remarks that Ben made there, bringing the sectors together—both private and public—to address some of the challenges. And I think what's crucial from our perspective is probably trying to garner trust. I think there is a high level of—'suspicion' is the wrong word, but—mistrust, probably, of developers and how they'll come into our communities and potentially not act in their best interests. And yet we see a lot of our developers working very hard to deliver community benefits. We've seen £6.5 million come into communities from onshore wind alone in recent years, and, if the pipeline that we are aspiring to, which is up to 3 GW in the next decade, is realised, that £6.5 million figure could increase to £20 million. So, it's not an insignificant amount of money that's available here to support communities, but it's also about demonstrating that we're not here to ride roughshod over that, there are community benefits to be brought, and bringing that trust element into both of that.

Thank you. And finally, then—

Tom would like to come in. Tom.

Yes. So, I was just going to build on Jess's point again on what I would like to see in the plan. Again, it's a strategic investment plan on how we can support the ports, really, because, as we've mentioned, the ports are so crucial to unlocking the local content within Wales, unlocking the supply chains, and ensuring those benefits reach, I think, the whole of Wales, not just the surrounding areas of the ports. So, yes, within that plan you were talking about, Jess, or industrial strategy, we really need to see how we can support the ports. I guess you only need to have a look across to France and see what—. They're really readying themselves for this same opportunity. I think we need to look at what they're doing and say, 'Can we match it?' or at least make a plan to try and get involved as much here in Wales.

Thank you. If I can ask Felix, then, my final question, your written evidence on behalf of FSB Wales suggests that the Welsh Government should support SMEs by adopting a 10-year growth journey for businesses and creating an economic development agency to provide expertise and to maximise use of resources. So, can you tell us how you would see these working, and what you would see as the potential benefits of these in supporting the development of—I hesitate to use the word now, the phrase—the green economy? Because we're going to rephrase that.

So, I definitely think there is a need for us to look at the green economy in Wales a little bit more holistically, so we need to look at mechanisms that can better support that. A Welsh economic development agency could be a tool in that mechanism, so being able to have an arm's-length body for Welsh Government that can help SMEs, businesses on the ground, strategising, bringing them up to the standards that Government directives are expecting of them, and ensuring that they're—. Like I said, there's a holistic approach to developing the economy in Wales, and I think, as we've heard from others, it's about having that lined-up strategy between UK and Welsh Government.

A Welsh economic development agency would be able to have people on the ground, working with businesses, with renewable energy projects, and be able to help them navigate some of the challenges that they're currently facing. So, amongst SMEs in particular, the biggest challenge that they're facing is skills training or upskilling. This is not to say that SMEs are reluctant to do much of this upskilling, but it's that they feel as if they're kind of left in the dark when it comes to the changes that are expected of them from Welsh Government. So, being able to establish a Welsh economic development agency will allow for SMEs in particular to draw on the expertise of civil servants from the Welsh Government, to better understand what it is that Welsh Government is asking of them, and to work directly with Welsh Government so that there is a joined-up approach and that they can make the changes that are expected of them in a timely manner that also doesn't frustrate the progress of Wales making a transition to renewable energy, or investing in green tech, and I know we're now trying to avoid using the word 'green' in front of things, but to make that transition to greener technologies. It is very much about having that holistic approach, having that joined-up decision making. But also, where SMEs and businesses need the support, they need to be able to access that, and we know that, through Welsh Government, there are often quite grand ideas, grand plans for the Welsh economy, but quite frequently we see a lack of initiative on the ground, and that's probably where we need to see a bit more initiative taken by Welsh Government to try and solve that problem.

Okay. Thank you, Vikki. I'll now bring in Samuel Kurtz. Sam.

Diolch, Gadeirydd. Thank you, panel, for joining us this morning. Jess, if I could focus my first question to you, if that's okay, as RenewableUK Cymru, you've said that Wales is being left behind on renewable energy when compared to other parts of the UK, as there hasn't been enough work done to develop a consistent pipeline of projects. What do you believe needs to be done to address this, and what lessons can be learnt from other parts of the UK and beyond?

Thank you, Sam. I think, first and foremost, it's important to reiterate—I mentioned it very briefly in the previous response—the impact of consenting and planning delays. Wales's attractiveness, I think, is diminished somewhat by a perception that decision making here can take an awfully long time and that the policy that sits behind it can be somewhat inconsistent. Now, there is a differentiation to make here; that that probably does differ between onshore and offshore. I know we've seen Erebus consented in a year, just over a year, which was quite remarkable and, I think, testament to some of the teams that work here. But when you then look to our onshore development process, it's a very different story.

We obviously have the infrastructure consent Bill going through the Senedd at the minute, which I think will do a lot to streamline things. However, the fundamental challenge here isn't necessarily the processes. I think we're reasonably content that the infrastructure Bill, with a few changes, could go a long way to support accelerating things, but it needs the resource behind it in order to deliver. So, as we've said before, there's quite a lot of ambition, and I think Felix touched on it there: we need a decade of delivery here. This needs to be about putting the people in place to get the answers that we need to get the projects off the ground. Timely consenting and planning is a crucial aspect that we're seeing being done a lot better in Scotland in particular. I think that has to be the baseline comparator that we've got here.

In terms of pipeline, I think there's also the look to the offshore market and the need—. We've seen the Crown Estate announce and open the 4.5 GW potential for floating offshore wind in the Celtic sea. But to extend beyond that and give our investors the confidence to come to Wales, and for the supply chain and ports to make that investment, we need the further 12 GW, which has been touted, but not yet had defined time frames put on. We need that established so that the confidence is there.

At present, as I say, we've got an underresourced process that is reflected across pretty much all of our public bodies—so, Welsh Government, Natural Resources Wales, Planning and Environment Decisions Wales, and also at local planning authority level. So, in the next five to 10 years, we're going to see a significant rise in submissions, and that's just going to keep on increasing. To quote a fairly significant statistic, or a quote that we've been using, we need to more than double the best build rate of energy infrastructure we've achieved in the past 50 years, and we need to do that every year for the next 11 years. That's really quite an undertaking, and unless we have the people behind it in order to do that, we're going to miss our targets. So, we need to see accelerated decision making, more decisions being made, and decisions made efficiently.

Thanks, Jess. Felix, you wanted to come back on that point.

I was just going to add to that a little bit. I am no expert in planning, but it is about the Welsh Government maintaining that momentum. They've set a very good standard in terms of the narrative of wanting to do things better, do things ahead of other UK nations. And building on that momentum, making sure that things are done efficiently, will benefit local communities. Because at the moment the narrative, I think, is often there, but the momentum behind the decision making is just not quite equatable.

Ben, coming to you and Net Zero Industry Wales, and touching on what Jess has mentioned there with regard to planning and consenting being a barrier to developing the green economy—and, again, Jess mentioned the underresourcing of not just the Welsh Government, but NRW, PEDW, local authorities, et cetera—do you think the infrastructure Bill will be an enabler, or is there anything that, from a Net Zero Industry Wales perspective, you are recommending to the Welsh Government to undertake to streamline planning and consenting?

'Yes' is the simple answer on both. I think the infrastructure Bill is helpful because it outlines the 'what'. We want to do things quicker, so that's great. That's exactly what we're asking for. But, then, it's about how. Jess was already touching upon that there are already issues with regard to enough planning and consenting processes in the environmental area, in Natural Resources Wales, local planning, but also PEDW. There are delays there. And that's not only because of the number of people, but also the right skills to assess these kinds of things.

We already have trouble now in the continuous improvement cycle, where we just deploy it at this rate. We will have, certainly, problems when we go into this transformational change, which Jess was alluding to earlier, with this decade of investment. I call it myself a tsunami of investment landing on our shores. And I think, if you really want to extract the social value of that—because that's what we want; we want to make sure that that benefits every individual person in Wales—we need to be ready to accept that, and we need to do that in a co-ordinated way. The only way I can think that this is possible is by working between the private sector and the public sector together on this, and create a collaborative delivery vehicle. That's exactly what we're doing now. We're doing that, actually, in Pembroke, with the multi-utility service transit, working with Pembrokeshire County Council, Neath Port Talbot Council, with the Milford Haven port authority, with RWE and Dragon, to create this collaborative approach to this very challenging consenting process.

We've also had some really good discussions with NRW, PEDW and the local planning policy team in the Welsh Government at a holistic level. I think we're all seeing this burning platform; we now need to find a way to make that work, and I think the only way to do that is by allowing more private resources to enter into that space, to de-risk that, to give that much more adequate, certain timelines, because that certainty of timeline is incredibly important when it comes to investor confidence. If we can create that, and use our devolved powers, as I mentioned earlier, as a strength rather than as a weakness, by having a strong, adequate, collaborative vehicle, underpinned by the well-being of future generations Act and those kinds of principles, I think we have a good way of resolving this.

And just one further question quickly—

Very quickly.

Jess mentioned the Erebus project. The previous First Minister, Mark Drakeford, mentioned in the Chamber around projects being able to help the consenting with the data that they gather themselves. Is that touching on what you just mentioned there as an opportunity?

That's exactly what I mean. I think the reason why Erebus had that attention is that they actually just saw a burning platform, to get it over the line, to get Wales in a position that they could actually be participating in this. So, there was a strategic need, and as a result, everybody in the whole process worked together to make that a reality. Private with public sector combined: that's what we want to make all across Wales, and make it a consistent policy, rather than based on who shouts the loudest. I think that's what we need to get to, because that gives investors confidence.

Thank you, Ben. Thank you, Chair.

Could I just come in on that again, sorry, Sam?

Just very quickly, yes.

Thank you. Just to support Ben's point there around policy being the thing that will underpin this going forward, we cannot state strongly enough how much we need consistent policy to support pipeline here. Just to quote an example, at the moment, onshore, we are faced with a 'Future Wales' policy that supports the development of onshore wind, and yet we see a fairly counterproductive policy within 'Planning Policy Wales' chapter 6, in the case of onshore wind. To give you a little bit of background detail, peat becomes quite a significant problem, and it's where we're really trying very hard to balance the need of the nature crisis with the climate crisis. But the Welsh Government are potentially going in a bit strong on one side and not really considering the other side of the balance. There is a need to step back and ask, pragmatically, how do we align policy across all departments to ensure that we can deliver this.

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

I've got no questions, Chair.

You haven't got any questions. That's fine. I'll bring in Luke Fletcher.

Diolch, Gadeirydd. If I can focus on skills for a moment, I think, since my election in 2021, we've been talking about that sort of skills gap, skills shortage, not just within that particular transition in the net-zero area, but across all sectors. There's anecdotal evidence that we've been given as a committee. Felix from the FSB has talked about, from their recent report, that

'growing perceived mismatch between the skills in the education system and those that business needs.'

Jess from RenewableUK Cymru said the same in the written submission:

'there are a lack of courses in further and higher education to train and provide the necessary qualifications'.

That is a problem. So, I'm just thinking now, given the length of time that we've talked about this, that we've all identified it as a problem, what exactly do we need to do to get to grips with it? Because obviously a lot of the ambitions that we talk about around net zero we can't really achieve if we haven't got the workforce to be able to back that up.

Our latest 'Skills-led Economy for Wales' report found several issues that cause issues around accessing skills for SME employees. In a recent visit to a member up in north Wales, they were dedicating 7 per cent of their annual revenue to research and development. They're a manufacturing company that produce machines for tin cans that are then made for Coca-Cola and other big companies as well. And there were aspects of that where they're dedicating their own revenue to R&D to better understand the demands of the economy, but also how they can make a sustainable transition in their energy usage, the materials that they're using, how they use their workforce, but also, then, how they integrate research, through universities, from the private sector, to make commercially sustainable decisions for them for the future. It's examples like that that we want to see across the board.

On one hand, we see SMEs willingly going ahead and doing it, because they see that's just commercially responsible for them to do so these days. On the other hand, they are citing to us that they need better support from the Welsh Government to help them navigate what those shortages are in the economy, what skills they can start to develop onsite in their industries. Again, it comes back to this joined-up holistic approach: we need to understand where the skills shortages are and what industry can do to fill those shortages. The FSB strongly believes that a Welsh economic development agency would be a good tool for that. It could help navigate and build relationships between universities and industry, to dedicate R&D to the demands that industry is currently facing, and allow for any skills shortages to be adequately resolved, based on the demands that industry is facing. I think, again, it comes back to this point of needing a holistic approach to R&D, and being able to incorporate that into industry.

So, in essence, we're talking about a system where constituent parts of that system simply aren't communicating regularly enough with each other.

Yes. Absolutely.

So, if you think of it as a triangle, we'd be talking about Government, business and then, say, FE colleges or the education sector, or both.

If we look internationally, we see a number of countries that have already led the way on this: Germany, France, Denmark, Norway, Sweden. Norway is a very good example. While the oil and gas industry is not renewable, it's a very good example of where the Norwegian Government actually established specific R&D committees to help influence industrial and business demands and solutions. It's the same type of approach that we need to see here in Wales, and, given the size of our country, it's not completely unthinkable to achieve.

Again, we need to be a little bit more ambitious, we need to be a little more concurrent with the activity that we're trying to create, rather than coming forward with these very nice big ideas, but they're not really putting the legwork in behind the scenes to make that possible. It is about consistency, it is about also drawing on the expertise of our institutions. Because if you look at the work that Bangor University and Aberystwyth have done, Aberystwyth have done some fantastic work in terms of developing technology on how to grow crops in simulated environments. That same technology has been drawn on by Danish companies. So, Wales can lead the way; we just need the Welsh Government to realise that joined-up thinking.

And just on a final note, I'm going to come back to Câr-y-Môr, because I think Câr-y-Môr is a fantastic example of an SME and a business that has actually been incredibly innovative with what it's trying to achieve. Where specifically SMEs are given the space to do so, they will lead on developing their own solutions, and, quite often, the Welsh Government has something to draw on that experience and that expertise.

Tom Hill would like to come in on this.

I think there are two elements to solving the skills shortage problem. We've talked extensively about the pipeline—that needs to be there, that guarantee that there are projects coming through, and that ambition to ensure that we're not providing, I guess, false promises towards the skills providers.

And then, the other side of it is awareness. So, how aware is the population of Wales of our drive towards net zero and how we're going to get there with the various technologies, the various industries? That's got to start in the schools and then that's got to build, ensuring that children take the right science, technology, engineering and mathematics subjects, and those sorts of things, and initiatives to get girls and better diversity into engineering subjects. That will then, I guess, waterfall almost upwards towards the further education colleges, so that they realise that, yes, this is coming down—so, the awareness that there's this pipeline of projects coming, the awareness that there is going to be this skills shortage, and linking them as well with the industry so that industry can share their requirements, and they can build courses around to meet those needs.

Ben.

So, all this means, essentially, long-term commitment to consistency in Government policy, doesn't it, because if there's a change in direction suddenly, colleges are going to find that very difficult to react to? Businesses will—. Ben.

Yes. So, I just want to—. This links to an earlier point I made. It's about having a clear direction of travel. It's similar to what was being discussed. But I think it's about having a clear strategy and what outcomes you want to achieve, because the reality is that a lot of these jobs are engineering-type jobs. They're actually in an industry kind of environment. And what communities in Wales have seen for the last decades is de-industrialisation. Those plants are closing. On top of that, we have this narrative around a green economy, green sectors, which alludes to something that might happen in the future. So, what is now is the big question. How do you actually physically get into that space? What is the core reason why we're not doing things? It's because there's uncertainty about what we need to do. So, let's just first set out in stone what we want to achieve as a nation in collaboration with the private sector, then set clear targets and then deploy it, because I don't think we can see the skills agenda separate from the economic agenda in industrial terms, renewables—it's all interlinked with each other. So, it all comes back to a very clear industrial strategy, in which skills is a key pillar, as well as planning and environmental consenting, as well as having the right culture, which we talked about, of not seeing net zero as something that's done to business, but they feel empowered to do something. It's that integrated approach. So, I think it comes back to what we actually want to achieve as a nation. I think if you sit around a table and create a taskforce, which was mentioned earlier—I think it was Jess that mentioned it earlier—it's about actually—. If you sit around the table, I think, within a couple of hours, you will come up with an answer that we all like. It's about having greater clarity, and then you can get that clarity translated into the colleges and set up those training programmes.

Okay. Before Felix comes in, Jess Hooper would like to come in on this. Jess.

Thank you. I put my hand up just before Ben came in, so he said some of the points I was going to say. Bearing in mind that the transition opportunity we've got for our existing workforce is fundamental here, I think Ben's point more specifically about looking at this strategically is fundamental. So, our wider organisation, RenewableUK, is a national representation of the sector. We're actually looking at an industrial growth plan that is at a UK level. It has aspects that drill down a little bit on Wales, but it certainly provides an umbrella as to what we need to be thinking about.

So, I think there will be a little more clarity in where we sit, but I do think, within Wales, we need our own specific focus in on specific areas to reinforce—. Yes, the taskforce idea was something we put forward and we fully support that, but I think that plays very nicely into—. And looking to Scotland again for examples, they actually, last September, signed off on the onshore wind sector deal that they're taking forward. That's a very holistic look at all of the challenges that are faced. So, it brings to bear skills, it brings to bear consenting, and aviation, which I've not mentioned at all but it's a challenge that we face here, and it looks at grid. Admittedly, some of those aspects are outwith our devolved powers, but it really provides momentum in a fixed direction to a set goal and target, and that's what we're lacking. It's really, 'What are we aiming for in terms of the target, how do we get there in terms of the pipeline, and what are the key aspects that fit within that?', and it is that holistic picture that we need to bring to bear.

I've obviously touched there on a Welsh onshore wind sector deal potential, but that's one sector. We could do this for any of those, rather than green sectors—the transitionary sectors, Ben, just to support that remark that you've made there. I think it's fundamental that we have clarity on what that forward look looks like to support our supply chain, our further education institutions, the people that are being affected, like those in Tata. How do they transition from a job that they’ve been doing there into a job that is within this transitionary sector? How do we support them in doing so and what mechanisms do we need in order to do that?

Felix.

Just on that final point about Tata in Port Talbot, those who are working at the plant are not low-skill workers; these are very high-skill workers that need to be just upskilled and transitioned to, essentially, the change of economy that we’re heading towards.

I just wanted to bring this back, really, to the architecture of all of this. There’s a lack of it, really, and that’s what needs to be done by the Welsh Government—they need to look at the architectural structure of trying to deliver on improved skills within our economy. I’m just looking at a statistic here from the Organisation for Economic Co-operation and Development, and research found that if we were able to solve the skills mismatch, there could potentially be a 5 per cent productivity increase in the UK, and that’s huge. So, it’s very much looking at the structure, the architecture of what we’re trying to achieve, and, yes, having some of these higher level conversations, but also looking at the smaller and medium-sized enterprises in Wales and the role that they play within elements of procurement and supply chains. I think, quite often—. Again, we have talked an awful lot here today about renewable energy projects, some of these very much more glossy opportunities for Wales, but the backbone of the Welsh economy is the SME economy, and if we are serious about trying to gap-fill skills and trying to ensure that the Welsh economy is resilient for the future, we have to look at the role that SMEs play within these bigger projects, ensuring that SMEs are given the same opportunities, if not just a fair opportunity, to access procurement opportunities in and amongst these big energy infrastructure projects.

Great. Diolch. If I can—I'm just conscious of time—move to thinking about priorities for investment now within the wider green skills agenda, both RenewableUK Cymru and Net Zero Industry Wales have called on the Welsh Government to establish clean growth hubs. I'd be interested to know a bit more from Jess and Ben on that. I'm not sure who wants to go first on that.

Jess, do you want to go first?

Yes, if that's okay, Ben, I'll take the lead. As I mentioned before, we benefit from quite a few historical funding streams that have kick-starting key projects—so, Swansea bay city deal is a really good example, and funding to Pembroke Dock marine, which brought together four fairly fundamental organisations within the marine sector, and then similarly the north Wales growth deal to Anglesey. Then, associated with those, we see industry organisations supporting clusters such as the Celtic sea cluster or the offshore energy alliance in the north-west. I am cognisant that both of these are fairly marine focused, so there are gaps that we could bring to bear to fill in some of the gaps for other technologies. But I think what's key here is that those initiatives already bring key industrial players together. They just need further support to enable them to meaningfully deliver, be that in the form of additional funding coming through from the Welsh Government, more resource contribution from the Welsh Government, even, just to enable greater engagement across Welsh Government departments, ensure that departments are aware of what's happening in each other's departments and that there's consistency of approach between them.

And that, I think, ties back quite nicely to the offshore and onshore working groups or taskforce that I touched on. If we've got that collaborative approach that's bringing the private and public sectors together, those clean growth hubs have a natural fit to feed back into something that maybe sits at a national level, where they're sitting more regionally and enabling delivery specific to those local peripheral regions that maybe need it the most.

I think there's also a very key focus required for the recognition of the role that the private sector can and does play in this in order to stimulate inward investment and the job creation that we've been talking about here. We need a shift, I think, in the view that the Welsh Government have that renewables can be quite extractive. Yes, we are basically installing technology in some of our specific regions, but the energy that's being produced, or the electricity specifically, the electrons, they carry such a substantial value that it's an export opportunity more than an extraction opportunity. And I think we really need to recognise that there are benefits associated with having this infrastructure in our regions, the jobs that come with it, the community benefits that I've mentioned. I should also say, just as a correction to what I said earlier, or a slight addendum, that the £6.5 million and £20 million that I quoted are an annual income opportunity for our local communities. So, there's a real growth opportunity that is linked to these windfarm locations, but also in specific outreach hubs that do spring up, as we've seen with the Celtic sea and the north-west.

I'll come to Ben, and then I'll come to Tom, as I can see that Tom wants to come in. Ben.

Yes, within the south Wales industrial cluster plan, we have this concept of the clean growth hubs, and these are actually centred around the industrial hubs that are already there. So, when you ask the question of 'where', if you focus on where your big industrial hubs already are—they're dotted around the Welsh coast, and the south coast in particular, in Milford Haven, Port Talbot, Swansea, Barry, Cardiff, Newport—all of them are already there. And you have Anglesey up there as well, and we've got also Deeside and Wrexham—there are really key hubs there already where there are a lot of SMEs, as well as adequate large companies. So, that's where the hubs should be. And what we should be doing—it's again linked to what I said earlier—is about saying, 'What do those hubs need in order to thrive and transition to this green economy that we talk about, because it's a destination, not a journey?' So, we need to really start talking about how we transition that and how we support that. But having clear asks to the UK Government on getting a proportional component of the revenue support, we need to do that, to give them a fair chance to get that just transition across the UK, including Wales. And secondly, it's to link that very directly to the opportunity for them to have the right planning and consenting process to enable them to do that in a swift manner, so that they can remain competitive in the UK, as well as in Europe, particularly when CBAM arises, because that's when the regional differences will become amplified, because you get a ring fence, which isn't globally; that's around Europe, or even around the UK.

And thirdly, it's then about making that link between the generators, the renewable generators—and this could be the Welsh Government with their own energy company—as well as the private sector generators, and with the demand side, because there's an opportunity there to link them too. And that's what the German and French Governments do very well, is to say, 'You know what, these energy-intensive industries, they need energy, they need to be globally cost competitive, and what we do is we support them with power purchase agreements that always give them a lower cost of energy.' France is linked to nuclear, and Germany is linked to brown coal and other kind of plants, as well as their renewables. And they give them the price certainty by underwriting some of these things in long-term contract. I think this is an opportunity. So, it's a three-pronged attack: it's about additional hubs—making sure that we have the right questions to the UK Government on revenue support; secondly, it's about planning and permitting, getting the right resources around that, to make them thrive; and thirdly it's about linking to those renewable generators, because they can be dotted across Wales, creating that link between rural Wales, where those generators could be, and in marine, and those energy demand centres that need it.

Tom.

On the clean growth hubs, I just want to add that, obviously, we can't forget about the free ports. They've almost already done a lot of the work for us in creating those hubs—one in north Wales, one in south Wales. I think, obviously, with all the benefits that can come with a free port, we should—. I guess, the question was, 'What support can we do?' Well, let's get the right companies anchored in those free ports, to make sure that they're the right companies that are pushing this agenda that we're all talking about today. You're talking about your turbine manufactures, your blade manufacturers and those sorts of things that will really benefit from being in the free ports and which will, ultimately, allow the benefits to flow across Wales then.

Great. Thanks, Tom. I'm looking at the time, Chair, as I have just one final question.

Yes, sure.

It would be remiss of me not to mention that, obviously, we have a new First Minister now, and in his manifesto he pledged to support that shift to net zero and to support that green economy. So, if I could just go to each of you and ask what you think should be his priorities for investment to kick-start that. Shall we start with Ben?

I've already mentioned that I think it's working together with industry to set clear objectives and goals, to set an industrial strategy, and then to make it clear to the UK Government what you need from them in order to make that a reality. I think, politically, in the future that may be easier. But I think it doesn't matter whether we have a Conservative Government in the UK Government or a Labour Government or whatever comes in; I think it's important that we have that clear ask.

Secondly, I think there's a real need to develop these stronger public-private sector partnerships to get ready for this tsunami of investment and that transition that we need. We shouldn't take this as a 'business as usual' kind of thing. It should be really taskforce driven. It should be driven in a way that we actually are managing a big transformational change, and it requires a different organisation. I think that requires much stronger public-private sector partnerships, really founded with the principles laid out in the well-being of future generations Act.

And then, last but not least, I think we need to make sure that we have resource available in Wales, between the private and public sector, that matches our ambition, because ambition at the moment is this high—we talk about it, and that's the promise to the communities surrounding us—but the resource that we have available is this low. I think we really need to get to a point where we might need to tone down our ambitions slightly, but, actually, we want to really ramp up the resource to make that a reality, because it is, genuinely, a once-in-a-lifetime opportunity, and I think, if we don't take that, other nations will. We're in a race, and the action is needed now. That was really clear when I had an event last week, which we called EmpowerCymru, where that was really clear; action is needed now.

Felix.

I would definitely say that we want to see greater levels of foreign direct investment coming into Wales. That will help to stimulate large amounts of what we're trying to achieve. But, I think, just where those levels of investment happen, we need to set clear obligations towards building SME supply chains for higher and lower skilled capacities that support the different types of expertise that we've currently got in the Welsh economy. It's about making sure that there is a strong commitment to the SME sector here in Wales, and making sure that it plays its role, as we've discussed here today, in Wales's green economy.

I would also just say that we need to see more opportunities for peer-to-peer networking. I think one of the biggest challenges we're facing is that lots of discussions are happening, but they're not all happening in the same room. I think that slightly leads to what Ben's saying, which is that we do have a very short timespan now to get things right. We need to make sure that industry and the public sector are having the correct discussions in the room with each other, rather than them falling out of kilter with each other.

As I've continued to say through this session, it's about having a holistic approach, and also, I think, being momentous behind what we're trying to build in Wales, having the guts, also, to do things a little bit differently and to push the boundaries. Let's not play it safe. Actually, let's look back in 20 years' time or 30 years' time and say, 'Okay, we were a bit ambitious here, but at least we tried it.' I think that is the overbearing message I would have.

Jess and then, finally, Tom.

Thank you, Chair. I think there are a couple of points. So, pipeline certainty is fundamental for us. We need to see clarity on what that pipeline looks like in order to attract that FDI that Felix touched on. I think we need to recognise the role of private investment and what that represents in terms of our community benefits, in terms of biodiversity enhancement opportunities and in terms of SME development.

I think, just to link into Tom's remark around free ports, we've seen there a really good example of how the UK Government and the Welsh Government can work together to deliver something, and looking to that cross-border inter-governmental collaboration is a key aspect that we need so that we can align the devolved and reserved matters to deliver to the best of Wales's interests. I think that, then, will lead to us being able to attract those anchor companies.

If we can get big companies in—a really good example is Siemens going to Hull, and if you look at the delivery that has been associated with one large company locating there—. We've got a prime opportunity there with Tata and the port of Port Talbot—proximity to one another, and a geographical opportunity of space and laydown and the infrastructure. There should be something that we can do there to the benefit of the sector.

I think, fundamentally, coming back to the taskforce that I mentioned, we would like to see those come forward, and build and garner that trust between the sector and Government and vice versa. To quote the new First Minister's own manifesto, we need to recognise that Governments must take

'more active roles in private markets to secure better results for citizens and bolster industries providing good jobs,'

and now's the time to focus on working in partnership between Welsh Government, industry and communities, and in collaboration with the UK Government on reserved matters. We need a positive and aligned policy environment for renewable energy development. We need to establish Wales as a leader for net zero and maximise the associated benefits for the Welsh economy and communities, ports, supply chains and enhance biodiversity—it's quite a long list. I think certainty and confidence for investment is going to be absolutely crucial here, and it's only with project delivery that we will see these benefits realised. With significant UK and global competition for these projects and supply chain capacity and capability, we really do risk losing out on the largest economic opportunity for Wales in decades if we don't provide the right market and policy signals.

And finally, Tom.

Sure. You asked what were the top investment priorities. I'll keep it brief. I think tidal stream. We need to ensure that there's success in Morlais and that the economic benefits are maximised from that project. Secondly, ports. Our ports need to be FLOW-ready. For every £1 spent in ports, £3 goes back into the Welsh economy, so it's a no-brainer to support our Welsh ports. And finally, I was just going to put in there supporting a diverse energy mix. I think we should also be focusing on tidal range. Swansea bay lagoon was such a massive opportunity for Wales and Swansea, and I think that should come back onto the agenda and be a top priority for the new First Minister.

May I?

Just very, very briefly. Time has beaten us. Very, very briefly.

To end on a positive note here, we had an event last week and we asked the question: do you think Wales is an attractive place to invest? A lot of people from London, big investors, came to that event and the answer was that 65 per cent said 'yes' and 20 per cent were on the fence. Isn't that a great position to be in? What will stop us? The answer was that they didn't believe—. Only 25 per cent believed that there was enough capability to deliver that. So, I think, if we up the capability and we get better organised, we have a good shout.

Okay. Thank you very much. I'm afraid time has beaten us, so thank you very much indeed for being with us this morning. Your evidence will be very important to us in 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. We'll now take a short break to prepare for the next session.

Croeso nôl i gyfarfod o Bwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen, nawr, i eitem 5 ar ein hagenda. Dyma'r ail sesiwn dystiolaeth ar gyfer ein hymchwiliad i'r economi werdd, ac rŷn ni'n siarad â thystion am fodelau perchnogaeth amgen. Gaf i, felly, groesawu'r tystion i'r sesiwn yma? Cyn ein bod ni'n symud yn syth i gwestiynau, gaf i ofyn iddyn nhw i gyflwyno'u hunain i'r record, ac efallai gallaf i ddechrau gyda Sarah Evans?

Diolch yn fawr. My name's Sarah Evans, and I'm the director of business growth and consultancy at Cwmpas.

And Benedict Ferguson.

Diolch yn fawr. I'm Benedict Ferguson. I'm co-executive director of Community Energy Wales, Ynni Cymunedol Cymru.

Thank you very much indeed for those introductions. I'll kick off the session with a few general questions. How well does the Welsh Government support alternative models of ownership in the green economy, in your view? Sarah?

Shall I start first? I would say very well, in some respects. We're very lucky at Cwmpas; we're delivering Social Business Wales, which is that very specific support for those alternative models of delivery. I think we've seen, by providing that support—. The project was funded by EU funding, now totally funded by Welsh Government. But we're seeing a sector that's really growing, and, when we did our last mapping exercise of the sector, we're seeing a sector that's almost up, now, to about 3,000 social enterprises. But also just the change—. I think that change in how important environment is in the core principles and those core objectives of those organisations, and that has really grown. But I think we'll probably come on, as the questions evolve, really, in terms of that maybe additional support that's there, but I think, on that more generic for those alternative models of delivery, Social Business Wales is a good vehicle for that and that part of that wider social enterprise group. I'll hand over to you, Benedict.

We said we'd echo each other quite a bit. So here we are, yes. So, excellent work so far. Ynni'r Fro was launched in 2011. That was the first start of Welsh Government support for a funny thing called community energy. And our state of the sector report last year reported 36 active community energy groups, nearly 30 MW of generation in community ownership and 160 full-time equivalents working across the sector in Wales. So, it's been a really terrific achievement, and that wouldn't have happened without the years and years of Welsh Government support and the evolution into what's the Welsh Government energy service now, so there's real leadership now. But, as Sarah said, it's about scaling up now. So, citing the UK-wide state of the sector report and the UK parliamentary Environmental Audit Committee, I've got some figures here that, in 2022, the community energy sector was only 0.5 per cent of the UK's electricity, but an expectation that it could be up to 10 per cent of UK electricity generation. So, it's a real mistake to identify the sector as the small bit player that it is now. There's a potential to create a local energy market spine that supports communities across Wales, with a lot of co-benefits to community energy projects. So, it's really about the ambition to bounce into that and pass the few pretty thorny and persistent barriers that we're still dealing with.

What's your assessment of the role played by Ynni Cymru since its launch last August, how well do you think it's undertaking its role and are there any areas where it could actually improve, in your view? Benedict.

Shall I go on there?

Yes, I think this is one for you.

We've worked with Ynni Cymru a great deal, and it's terrific to have that sense of collaboration. There's good engagement coming out in terms of setting up a strategic guidance group, in terms of the community stakeholder group that our members are participating in. Ynni Cymru has taken under its wing a raft of resource grants given to a number of community organisations, and there's more about them in the training piece later.

I think there's still a clarification process going on and a need to make sure there's not duplication, for Ynni Cymru people to understand the landscape, what's already being done by the energy service, what's being done by Community Energy Wales. And I think we've started with—. We're still not in full clarity about what Ynni Cymru will do. So, when you ask how well is it fulfilling its role, there is still a role definition happening.

Our focus, certainly, is on this local energy market piece, and we think that it is absolutely critical. We started with Ynni Cymru as an idea of setting up an energy company for Wales. There are a few yards to be done on governance between here and there, from where we are now, but, with that resource in place, we think that it's critical to land that resource on unblocking the market barriers. I can unpack that a bit if you want to hear about that. So, existing exemption in the electricity market regulations allows for up to 5 MW generators to supply to customers without being licensed energy suppliers. Of that any 5 MW piece, 2.5 MW of that can be to private customers, householders. So, there is a huge potential impact in unlocking route to market at better value that will release capital for more projects, addressing a couple of the really big problems that we've got. That can feed into whole energy systems as we start to look at the wider parts of the route to market, so electric vehicles and the electrification of heat and heat networks across communities. So, this is a really huge market; it's very, very powerful.

But, fundamentally, while we've got the example of the Bethesda energy local project, which was established in 2016, that has demonstrated that you can save customers money off their bills, that you can give customers more empowerment and enablement by giving them visibility over their data that's collected through smart meters to change their time of use, to reduce the impact on infrastructure and reduce some of those grid problems that we've got, and we've certainly got problems with grid in Wales at the moment—. So, that's all there. The blocker is licensed energy suppliers, and they're dragging their heels. They lobbied quite hard to prevent the amendment to the electricity Bill going through last year that would have compelled them to provide the billing platform. I think that Ynni Cymru can provide that platform. So, we really want a laser focus on that.

In terms of Cwmpas interaction, we've just had some quite basic interaction with them at the moment, but really thinking about that extra value creation, that social value that can be created and that engagement with community organisations as well. So, that's where we are the moment, but realise that there's room to take that forward.

Yes. Sarah, Cwmpas says:

'The development of social enterprises and community-led business models must be at the heart of strategies'

to develop the green economy. What steps, then, do you think the Welsh Government should take to do this?

I think it is that clarity in the strategy about the roles that those businesses can play. They're anchored in their local communities, they employ within their local communities, they spend within their local communities. In the vision and action plan that we've got, the 10-year vision and action plan for this sector—of which we're about almost three years, four years in now, that I was lucky enough to write when I joined Cwmpas—but we've got that that transformation is about social enterprise being the model of choice, and we're updating a progress report on that and the progress that we are making, as I said, we're seeing that growing, but I think it's been really clear in those plans that those organisations are key drivers to making this happen.

Okay, thank you. I'll now bring in Vikki Howells. Vikki.

Thank you, Chair, and good morning to our panel. If I can ask a question to Benedict first. So, Community Energy Wales has called for the Welsh Government to develop an urban community energy strategy, because the model that we've got currently has been predominantly undertaken in rural areas. So, what would you want to see included in that strategy?

Thanks, Vikki. Certainly, it's a really welcome question to build on that. So, the fundamental, the balance you've got, is most community energy projects are happening in rural areas, where there is abundant access to natural resources that can drive renewable generating technologies, and the barrier for the growth of that market in many ways is the sporadic and spread-out demand in rural areas, and in urban centres you've got exactly the opposite situation, where you have quite concentrated demand but much less opportunity to join that to natural resources and renewable energy generation.

I think I've spoken to some of the pieces that need to be held in this strategy at the moment, so it's electrification of heat, EV charging, the way that transport policy develops on urban streets will be very relevant to this. We think we can take a lot of cars off the road, by the way, with electric vehicle car clubs, which is a project we're piloting also with excellent support from Welsh Government, just announced a week ago.

So, I think those are the sort of nuts and bolts that need to be in the plan: how do we get generation from out of town into town, but in community ownership and in those sorts of local energy markets? How do we get individual rooftop solar owners and microrenewables into that local energy market and get the maximum benefits from balancing and sharing energy? There are some good projects around. Project Local Energy Oxfordshire is a great example of private sector, community sector and local authority working together and solving some of these thorny problems. So, I'm glad you didn't ask me what the strategy should look like, but those are some of the nuts and bolts that we'd like in it.

Thank you. That's really interesting. And if I can ask you now then, Sarah, the paper from Cwmpas says that procurement is key to achieving the Welsh Government's ambitions to develop the green economy. So, how would you like the Welsh Government to use procurement innovatively to support these alternative models of provision?

I think there's something about setting that procurement direction for the public sector as well. We'd like to see, I guess, when you're undertaking procurement exercises that there is that social value element—or as we're hopefully going to be calling it now, that 'well-being impact'—is being looked at in there in terms of how you're procuring, how is that procurement, I guess, aligned and maybe being co-produced with local social enterprises, so that looks and feels very different, that that local supply chain is really developing.

So, I guess, to us, I think that's really key, and we know it can happen; we've seen it work well, but I think it's then that contract management, to make sure that that value that you've embedded in that procurement is being delivered. We are talking now with Welsh Government and we've recently been commissioned to look at standardising the well-being impacts through public sector procurement, which will apply to Welsh Government too. So, I think there's something about how this is all being reported, and everybody feeling that the results that have been procured to deliver that service are feeding into Wales and that far bigger picture, and showing what we're actually achieving in terms of the green economy.

Thank you. And, Benedict, is there anything you wanted to add there on the issue of procurement?

Yes, a very specific really specific point, Vikki, would be great to add, which is just about the reporting of electricity that's procured by statutory bodies. So, public bodies, when they buy electricity, have to make annual carbon reports and they have to report any electricity that they buy that’s touched the grid at grid carbon factor, and that applies even if they have renewable energy guarantees of origin, and even if they build their own solar farm and sleeve the electricity. If it’s not your own piece of copper to your hospital or your council office, then you actually get beaten with not saving carbon.

So, there is a Welsh Government energy service working group that has been working on this, so, there’s a plea here to support that working group and just get that understood. If councils and public bodies can procure electricity from and with community organisations and on their own estate, that will take a big barrier away. That would actually immediately give a route to market for quite a lot of consented projects that just can’t get finance and be built at the moment. So, you would have a quick win, and I think that you would see a lot of projects would have confidence to develop, to come in behind that.

Thank you, that's a really important point. One final question to both of you: I'm just wondering how alternative models of ownership, how you feel they can contribute to delivering a just transition, and what support they might need from Welsh Government to enable them to do that.

Do you want to go first, Ben?

Yes, happy to, okay, Sarah, yes. I think the key focus for us around this is probably shared ownership. So, shared ownership has got a great policy position and ambition on—. The Welsh Government, sorry, has got a great policy ambition on shared ownership. That’s been backed up by guidance for decision makers and local stakeholders, but we’re having real difficulty delivering it, I’ve got to say. It’s really challenging. We’re running a working group at CEW on that. We’ve got increasing numbers of developer members who are keen to meet the shared ownership objective, but really don’t know how, and we’ve got a real gap of resources to actually help community stakeholders do the commercial negotiation. This is way above most community energy organisations’ heads—it’s a very difficult commercial negotiation to undertake.

Where we’ve got friendly developers, like RWE, who have come in early as forerunners, we’re developing projects that have got an agreement, that are resourcing the community and paying for that, but not all the developers have that level of willingness, or that level of willingness to leave the community stakeholder to be hands off and clean, and, possibly, they’re just doing smaller projects that don’t have that much fat in them, or they’re still making the case.

So, there’s that piece about supporting the commercial and legal negotiations, and then there’s a lack of capital and a lack of confidence. If you look at the pipeline to 2035 and what we need to achieve—and you imagine that people talk about 10 per cent of shared ownership or 15 per cent of shared ownership—well, you’re talking about £1 billion or £1.5 billion-worth of capital, and it’s not going to come from community share offers. Everybody knows that really, and the private sector knows that, and they’re looking to see how that capital will come through. So, we would love to see a way to set up, probably, a larger fund than is currently the £10 million in the community energy fund, and we would need look at innovation around the governance of that fund to bring in capital that could be put into projects—probably at financial investment decision point with the developer, which is quite hard to achieve—and then allow a community share offer to run for a long time and repay as much of that as possible.

Sarah.

Yes, I think that idea of community shares and our social enterprises, I'd say that they're already contributing to that just transition and, as we've alluded to already, bringing support through Social Business Wales. But I think our social enterprises are reporting that triple bottom line—that people, planet and profit—and that's really important. I think there's good support available, but there's potential for more of that to really contribute to that just transition.

I think something about that mentoring. I know we're going to come on to talk about maybe future opportunities and support, but I think there's some great work going on in those businesses already in terms of their environmental objectives and where they see themselves in the green transition, but I think that support they can offer to take communities and our local communities forward is definitely there.

Okay. Thank you, Vikki. I'll now bring in Samuel Kurtz. Sam.

Diolch, Cadeirydd. I've got two questions—one each—but feel free to jump in off the back of either's answers to these. But firstly, to Benedict if I may: you've said that increased start-up finance, particularly grant finance, would help community energy projects to get off the ground and progress through the early, highest risk phases. Can you tell us a little bit more about what those high-risk phases are to community projects, and what approach to funding would be needed to address those challenges?

Yes, thanks for the question. The first part of my answer is that we know the risks really well, and they've been in report after report after report. Just recently, we've had the state of the sector report, which we launched in December, and the infrastructure commission identified some of them. So, you're talking about planning, licensing, grid, route to market and finance, and we keep linking those route to market and finance options. If you can get a good price for your power, then finance becomes a much smaller problem.

But there's another big obstacle, which is the community engagement, along with what I said in my answer to the first question, which is the scale-up. It's an awesome level of scale-up. And, historically, the Welsh Government energy service has found this really difficult to resource, and you can understand why, because it could go everywhere at any time. We saw, for example, during the cost-of-living crisis, much higher volumes of people coming to our members and to CEW looking for support to start a renewable energy project locally. We didn't have the resources to really support that. If you go to the energy service now with anything smaller than a 250 kW project, you're unlikely to really get very serious support. So, I think, particularly if we solve the local energy market piece, that will create an opportunity for that scale-up. And it's probably important to start thinking about ring-fencing and dedicating some resource to community organisations that are at the very beginning of the journey and need a lot of hand holding, and then the feasibility work behind taking projects and meeting those first barriers I mentioned.

Okay. Thank you. Sarah, anything to add on that point?

No, I think I'll wait for our questions. I think that probably segues quite well.

Yes, no problem. So, you've said that social enterprise has faced barriers to decarbonisation, such as time, a lack of staff resource, and that the locations of some social enterprises present issues. I'm just wondering what Cwmpas would suggest needs to be done to address these challenges.

Yes, that probably, as I said, follows on in terms of that resource. I think we've got general business support in Social Business Wales, but I think—. There's a lot of noise, isn't there, about transition, there are lots of words; people need to understand what does it mean to them and their social enterprise, their business, their community. So, I think it's having that resource to support them through the process and knowing what they can deliver on a local level. Some of that might not cost very much.

We've also been thinking through our project that Welsh Government has supported, called Newid, which is around supporting digital implementation and exploitation in third sector organisations—how can we be using digital technologies to really show how we're transitioning to a green economy? So, I think there is some good stuff out there already, but I think, with some extra resource, we could really see a sector shaping towards overcoming those challenges that they're facing. Funding is such an issue at the moment to the third sector and the social enterprise sector in Wales. The loss of EU funding, shared prosperity looking very different in every different county across Wales. And it's how can they be accessing funding to really support this transition and play the role we know they can within it. Thank you.

Okay. Thank you.

Diolch, Sam. I'll now bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. In our last session, we asked questions around skills, and it seems like it has been a very long time of us discussing the shortages in the wider economy of skills across all sectors, really, and that's something I think Community Energy Wales identified, that need for encouraging young people to get into the sector, the need for teachers to recognise the potential future within that sector as well. So, I'll ask the same question I asked the last panel, which was: what exact actions do we need to take to address that skills gap, and who should be responsible for those actions? Shall we start with Benedict?

That's a very specific question, Luke. You've backed me into a corner. [Laughter.] I know you had some great answers earlier on some of this from Jess and the people in the last session. One point I want to make about skills that's often mistaken in the community energy sector is actually just the breadth of skills that are needed. So, not to always focus in. We're not focusing on engineering skills or project management skills only; there's more in terms of the community engagement skills, the commercial skills that are talked about, legal skills. Working in a community energy, people have to be incredibly broad in the way that they work—just to sort of mention that. And I think, you know, there's good work already there in the green individual learning accounts, and that's probably working as a mechanism. It's about piling more into that. And the other comment I'd make in response is probably about continuing professional development for teachers, just giving teachers a real sense of what the green economy looks like, what a green future job market looks like—them and careers advisers—so that they can pass that vision on to the young people and encourage them into the right training pathways.

I suppose a lot of that's quite similar for Cwmpas as well, isn't it?

Yes. We've actually just been working with ColegauCymru and the 13 further education colleges in Wales, looking at the social value that's being generated through further education. And I've been really impressed with the way they're taking on some of those green skills and how, then, that is affecting their local economies and what they're delivering, but also, the potential there for the spin-out social enterprises that could be there. So, yes, I think we've been—. You know, I think there are some good basics there that could really be built on, but we're very impressed with what the FE sector are. But, as you mentioned, Benedict, I think it's then thinking about lifelong learning opportunities that are there after, as we all want to keep developing those skills as well.

I suppose it touches a lot on some of Vikki's questions previously on alternative models of ownership and trying to get that into the education system as well. I just think back to when I was in school and you'd have business as a subject. It was always geared towards, you know, an entrepreneur, a single person setting up their own business and going to make a load of money, rather than actually saying, 'Well, you could potentially set up a co-operative with your mates and do something different'.

Yes, that's definitely something in Cwmpas, and the vision and action plan for the sector has been great with that. We've done a lot of engagement with universities and we're doing an engagement now with the FE sector, but also with schools and our younger entrepreneurs, starting to think of those social business ideas from a young age. And I think sometimes it hasn't been embraced, Luke, because people don't know about it. So, I think the work that we've been doing in promoting that, and I think the Audit Wales report, as well, about social enterprise and missed opportunity, that has gone out to a lot of local councils—. We've been working with a lot of public sector local authorities—and health boards, to be honest—to really promote what it's capable of. You know, we're trying to come at this, I guess, from a lot of different angles.

Can I come back in again on that?

Yes, of course.

I do really like the sort of lean of the conversation there into a values-led society that would be great to get back to—or get forward to, in fact. And I'm just reminded of someone I interviewed recently for a job funded by the Welsh Government energy service resource grant funding that I was talking about. So, there's a value of our members there in bringing new people into the community energy sector, and they're going to train on the job and that's because of funding that's available to create those jobs. So, one of the people that I've been on an interview panel for for those jobs said, 'I'm really great at all of this that I've been doing for the last 15 years, but I'm looking for work that is more aligned with my personal values to support my community'. So, I think, you know, that's a nice nugget to hold on to—that if we look at being more values led in where we direct this, I think that's where we pick up a lot of free energy along the way, psychospiritual, emotional energy, which is really what makes our community and our culture and our society work well, work best.

If I could just touch on supply chains very briefly, and I'll come to Cwmpas, if that's okay.

Yes.

So, Cwmpas has been really clear that the Welsh Government has a real key role to play here in supporting Welsh supply chains and helping develop them. So, what actions specifically would you like to see the Welsh Government take in supporting those supply chains?

I think, you know, we've already—. Vikki already asked the question around procurement, and I think that's key in terms of how a procurement opportunity is being shaped up. You know, how can they be co-produced? How can we make things look different? We've got great legislation in Wales, haven't we? We've got the well-being of future generations Act. That makes us look at things in a very different way. We've got the Social Services and Well-being (Wales) Act 2014, which sees us shape up those social services—public sector bodies proactively looking to work with social value models of delivery, and yet, in reality, we're maybe not seeing that happen, not on the scale we would have expected by this stage, I think. So, it's thinking about where those opportunities are to build social enterprise consortia, to be able to go for bigger public contracts and develop our local supply chain. And I think, you know, we've worked with a number of different councils, and I would say, as well, we've got to think of our SME sector as well. We've got a large SME sector in Wales, haven't we? We've got to think, as well as how we can we be developing those, have they got the skills to apply for procurement opportunities, rather than just being put off when they download the 70-page document and know that actually putting in a tender is going to take weeks and weeks of effort. I think there's a way to proactively shape this in quite a different way, thinking of innovation opportunities as well—the Welsh Government's innovation strategy, innovation funding that sits there. What are the opportunities for the social business sector to win some of that funding, to then look at developing scalable commercial opportunities that can sit around it? So, you've got a lot in your armoury that can be used. I think it's just thinking now how we make that a far more collaborative approach to developing supply chains.

Great. Unless Benedict wants to add to that—

No, nothing to add to that.

—I'll hand back to the Chair. Diolch yn fawr. Diolch.

I'll now bring in Hefin David. Hefin.

Diolch, Cadeirydd. Would the panel like to say anything more about innovative funding models for transition and models of ownership, and, particularly, Community Energy Wales mentioned that patient underwriting of equity stakes—can you just elaborate on what that means as well?

Yes, thank you. In terms of the patient underwriting, I think it was what I was starting to refer to, talking about shared ownership. I mentioned a figure of £1 billion or £1.5 billion. That capital's not going to come into the Development Bank of Wales, but something to prime the pump is certainly needed, and it's really about being able to undertake due diligence and take an equity stake in a shared ownership project at that financial investment decision point. That will, I think, be very helpful to the private sector, particularly the part of the private sector that's developing really medium-scale projects rather than large-scale projects, where the red lines that their investors have are going to make it quite difficult to offer an equity stake, and if in those cases we can make a loan in at the financial investment decision point, I suspect that will ease those projects, and I suspect that most of that money will then be able to come back in through community share offers. I think there is also, possibly, some innovation in that space around the gap in terms of having a hand on securable assets, but I don't think it would be helpful to go into a large amount of detail with that there.

I think there's just another thought that I have about innovative funding, which is really about prudential borrowing and local authorities. We're really failing in Wales at getting decent collaboration between the community energy sector and the local authority sector, and they can help each other so much, and I think this is one of the areas where they can. If prudential borrowing can be brought into finance one part, with community energy and share offers coming in after that, then both parties can get a huge amount of bang for their buck. We're just not managing that at the moment.

Yes. I think, from a Cwmpas perspective as well, thinking around some of that innovation funding that the Welsh Government have, looking at some of the—. We had a foundational economy challenge fund. I think that sort of challenge fund approach is really helpful as well. In the longer term, I think it's our social businesses being able to access investment funding. Grant funding is great to get things going, but, to really scale and pace, we need investment, maybe through the Development Bank of Wales, through Social Investment Cymru. We need that investment to be there, rather than just relying, I think, on some of that more piecemeal grant funding. We need that innovative funding landscape and models to look really different if we're going to really embrace the green economy and the transition that we know and want to happen.

With all that in mind, what do you think the main priorities of the First Minister should be in that regard, if you were to pick out key items that you think should be taken from the manifesto and also what you would like to see?

Shall I go first?

Please, yes.

I think, for me, first, maybe before setting priorities, it's maybe where the drive to the green economy sits. We hear talk about the well-being economy. We hear talk about the foundational economy. How does the green economy link into this? Is the green economy part of that drive towards the well-being economy? I think, using the lens of the well-being of future generations Act is maybe a great way to set that policy and see. The social enterprise sector wants to see how it all links together, because to win grants and funding, they've got to be putting that narrative into that policy agenda. And I guess, for us, it's that investing in the third sector, in the social enterprise sector, to be able to deliver this and really share in that good practice that we've already got happening in Wales.

I noted three things down, seeing this question coming up. You've got to get your arms around Ynni Cymru as an opportunity to establish a local energy market for Wales, at distribution level, up to 5 MW. It's just the single—. It could be the most powerful thing that you could do for communities in Wales, honestly, if we can grab 10 per cent of the energy market and have that in local ownership and local empowerment, with everything that happens to social enterprise and communities when community energy organisations are successful. So, get your arms around that. If Ynni Cymru can provide that platform, it will create a really open playing field. So, you've got to get the energy service ready to support the new projects that will come in to fill that and take advantage of that.

So, that's what's got to happen at the grass-roots level, and, then, there's an interconnect with shared ownership, which is the bit that I haven't said about the power of shared ownership, which we're a long way from realising yet. Once we get better relationships with communities and developers—because we're sharing ownership of projects—I really believe there will be long-term benefits of collaboration, skill sharing, that value piece, coming in, and the interaction, the influencing of communities in society on big business. So, I think there's a big value piece here. So, yes, just get behind that support for shared ownership. So, those are my three asks.

Yes, if I could just come back as well, it's just thinking about if it's a priority to have funding there for our social enterprises to be able to apply for, to be able to be supported through the transition. I think that's really important as well. Thank you.

Diolch, Cadeirydd. That's really helpful. I think, when it comes back to scrutiny of the new Government, we'll be using some of the transcripts from this session to inform our scrutiny. So, that's very helpful. Thanks, Chair.

Yes, absolutely, Hefin, we'll certainly do that. Our session has come to an end, therefore, so thank you very much indeed for being with us today. Your evidence will be very important to us in our inquiry. A copy of today's transcript will be sent to you in due course, and if there are any issues with that, then please let us know. But, once again, thank you for being with us today.

Thank you.

Diolch yn fawr.

And if you need any more information, Chair, just let us know. Diolch yn fawr.

Thank you very much indeed. We'll now take a short break to prepare for the next session.

Croeso nôl i gyfarfod Pwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr i eitem 6 ar ein hagenda, sef ymchwiliad i Fanc Datblygu Cymru. Fel rhan o'n hymchwiliad i Fanc Datblygu Cymru, rŷn ni yn cymharu'r modd y mae banciau datblygu yn gweithredu mewn gwledydd eraill. Diolch, felly, i'r cynrychiolydd o fanc datblygu Canada am ymuno â ni o Montreal, Quebec. Cyn ein bod ni yn symud yn syth i gwestiynau, gaf i ofyn iddi gyflwyno'i hunan ar gyfer y record?

Thank you very much, and thank you very much for inviting me to appear. My name is Karen Kastner, and I'm the vice-president of strategy, priorities and shareholder relations at the Business Development Bank of Canada, or BDC.

Thank you very much indeed for that introduction. I'll kick off with just some general questions. Perhaps you could explain the Business Development Bank of Canada's status as an arm's-length Crown corporation and the nature of the bank's relationship with the Government of Canada.

Certainly. BDC is a creation of statute, which means that it's created and governed by the Business Development Bank of Canada Act. We, BDC, report to Parliament through the Minister of Small Business, but we are a Crown corporation, which means that we operate as a company does. Our sole shareholder is the Government of Canada. We have a board of directors, which is appointed by the Government of Canada, a CEO, of course, and then a senior management committee that reports to the CEO.

To what extent are the bank's activities driven by or linked to the Government's economic strategy, and how does this factor into individual investment decisions?

We have the BDC Act, but we also are governed by the Financial Administration Act, and that is a statute that governs other Crown corporations as well. In that statute, BDC is required to do what's called a corporate plan. Or corporate plan is a five-year plan that's updated every year. It includes a description of our activities as well as the financial plan associated with those activities.

In the course of developing that corporate plan, we have extensive discussions with the Government of Canada around the priorities and how BDC, as Canada's development bank, could help to advance those priorities. Those are reflected in our corporate plan, and that corporate plan then is approved by the Minister of Small Business, and is also then approved by the Treasury Board of Canada.

In addition to that more formal process, we have ongoing discussions with the department that is governed by the Minister of Small Business. So, ISED, as it's known in Canada, is the department that we interact with—the small business branch of that department. We also interact closely with the department of finance on other topics. Those discussions are ad hoc but ongoing and regular, and where there is a need for BDC to be involved in advancing some of the priorities of the Government, that will happen.

The individual transactions are decided by the management team at BDC. So, while the Government is very much involved in setting the direction of BDC and approving that through our corporate plan, individual transactions are approved by the management team here at BDC.

Thank you very much indeed for that. I'll now bring in Vikki Howells.

Thank you, Chair, and good afternoon to you, Karen. Could you set out for us the range of services offered by the Business Development Bank of Canada, including its approach to supporting female entrepreneurs and those from Indigenous communities?

Certainly. BDC has what we call three lines of business. The lion's share of what we do is lending, and it's term lending. We have a portfolio of over CA$50 billion in lending to small businesses. Our current client count when we count the direct clients—so, clients that we serve through our account managers—but also indirect clients—ones that are served through more of our wholesale business—is approximately 100,000 clients. That's the lion's share of the business. We also provide advisory services—think about it as consulting services. Those are intended to really help small businesses with key features of their businesses, whether it be financial planning, revenue generation, efficiency, growing their international footprint. We do about 2,400 mandates a year in that business line. And then our third business line is related to venture capital and equity. We have about CA$4 billion committed to mainly technology companies in Canada that we invest in, along with other investors.

As for our support for women entrepreneurs and Indigenous entrepreneurs, we do track that carefully and, in fact, have a strategy that is a long-standing strategy to reach more women entrepreneurs. We do that through our financing business, our lending business, but also through our equity business. We currently have CA$1.6 billion in loans to women entrepreneurs, which represents about 17,000 women entrepreneurs. But we also have a CA$500 million fund called the Thrive platform, which is delivered through our investment business, our BC business. That fund looks to invest in innovative firms that are run by female entrepreneurs. It looks to invest in innovative fund structures that then go on to on-lend to female-run businesses. It also looks to invest in other ecosystem initiatives that set out to help women entrepreneurs.

Thank you. We're really interested in the model that you've got there with the advisory services, because it really is quite unique to have that, with the sales and marketing, financial management and HR advice. Could you maybe outline for us a little more about why you think that approach is so beneficial to businesses?

We actually looked at the impact several years ago. We did an economic impact study to see what the impact of our services is, but also what the impact of combining financial services with the advisory services is. And we see that, in fact, the businesses that we finance that use both financing and advisory services show stronger results than comparable clients that are using only financial services, or are not using either. So, there is, actually, an economic argument and an evidence-based argument for advisory services, which is important. But intuitively, we've been doing advisory services in some form or another since about 1970, and we know that often a business will have issues that are not completely solved by money. And so, over the years, we've tailored our learnings to what kind of services small businesses, in particular, need, and have built that out over time.

Thank you. Does BDC appoint representatives to sit on the board of directors of the companies in which it makes equity investments? And if so, how are these directors selected?

We do. The vast majority of our investee companies have a board we appoint a board member to sit on. There are several where those appointees are actually observers, but it’s about a 2:3 ratio. The board members that we select are typically BDC employees that we’ve hired because they have deep domain knowledge in the technology that the company is built around. Most of those board members are actually what we call BDC partners, meaning they are employees that we’ve hired to do the investments.

Thank you. One final question from me. BDC is required to be financially self-sustaining and offer commercial loans. How does this factor into BDC's appetite for risk?

I should say that all of our clients have a relationship with a commercial financial institution. They typically have a line of credit, or some other relationship. Where BDC comes in often is to do a transaction that is either outside the risk appetite of the financial institution, or comes in to share that risk with the financial institution. So, we'll do realty financing, we'll do equipment purchasing, we do a lot of work in capital financing. When we look at our portfolio compared to financial institutions, we see that the vast majority of our clients, when you look at them on a risk scale, are below investment grade, or BB+, whereas the financial institutions typically have an inverted risk profile, so their clients are more above the BB+ range. So, we take more risk, but we charge for it. We typically are more expensive than other financial institutions, so that's the way in which we stay financially sustainable.

Thank you very much. Thank you, Chair.

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

Diolch, Gadeirydd. Thank you for your time, Karen. One of the things we're talking about in Wales now in the context of the Welsh development bank is putting it on a legislative footing. That's been part of the evidence we've received so far in this inquiry, and of course BDC is underpinned by legislation through the Business Development Bank of Canada Act. I was just wondering if you could potentially point to some of the benefits being underpinned by legislation has had for the bank.

BDC has been around for 80 years, and in several different incarnations. It has always been governed by statute, so the Canadian context doesn't have a non-legislative context to compare it to. But I could say that our most recent incarnation is the statute that we currently have, which was enacted in 1995. It has been remarkably resilient as a statute, and I think part of that is because the mandate is clear, but has been flexible enough to allow us to adjust to the times. The mandate talks about a focus on SMEs, it talks about our main lines of business, but it doesn’t go into specifics around the how, which has enabled us to really evolve in a way that’s maintained BDC’s relevance. One of the benefits has been to really ensure that we have always maintained the core value of focusing on small and medium-sized businesses in Canada around certain business lines, again with the flexibility to evolve based on the contexts.

Would you say there have been any downsides at all?

Nothing's coming to mind.

Okay. So, I suppose, then, it all depends on, essentially, what that mandate sets out, doesn't it? You talk about 1995, and the flexibility, of course, is the key part there, isn't it, because times change.

Yes. Setting a core foundation, but enabling for that flexibility to adjust. We haven't had to go to Parliament many times over the years to seek legislative amendments because we've encountered any barriers.

Great. And finally, very briefly from me, one of the things the Act requires is a legislative review every 10 years, so I'd be just interested to understand how that actually works, and then how that then influences the way BDC operates.

Well, the timing for that question is good, because we've just completed the third legislative review of BDC. So, since 1995, the first legislative review was five years after the enactment of the law, and then it's every 10 years thereafter. The way in which that works is it is a Government review, so the Minister of Small Business undertakes the review. Again, the Act is not very prescriptive on the manner in which the review is conducted, but it does say that it has to be conducted within one year, and then a report has to be tabled in Parliament by the Minister on the review.

And so, the latest review, the way it was conducted was that the department of Innovation, Science and Economic Development Canada, the small business branch of that department, did consultations, consultations with business associations, financial services, credit unions in Canada, and various other organisations with an interest or an opinion on BDC, and conducted consultations, invited public comment on a website, and did other internal-to-Government consultations, and then drafted a report with recommendations for BDC to take on board. We received that report, or that report was tabled in November. BDC, obviously, takes that report quite seriously, and we're looking to see how we incorporate that into our strategy.

Fortunately, the recommendations are very aligned with the strategy that we've started to implement in the last couple of years, so we're very much aligned with the way the Government is seeing the future progression of BDC.

Grêt. Diolch yn fawr. Nôl i ti, Cadeirydd.

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

Diolch, Cadeirydd. Good morning to you, Karen; thank you very much for joining us here in Wales, albeit digitally. Thank you very much for that. I'm going to ask a couple of questions around complaints and handling of complaints, if that's okay. I'd be grateful if you could set out how BDC handles complaints, and explain the role of the ombudsman.

Sure. We have a complaint process that is quite public, actually, in terms of process, and in fact there's a complaint process that we've made public to inform both clients, or applicants, and also suppliers of BDC. So, the process for a client or an applicant would be a three-step process. The first would be to advise the business centre manager of the location where the transaction or the application took place. And so, on our website, or if you do a Google search, there's a number for a person to call, to be able to find out if they have any questions about what that business centre number is. At that point, the applicant or client will be connected with the business centre manager who would look into the complaint. If the complainant is not satisfied with the way in which that person has handled their complaint, then there is an escalation mechanism to the vice-president who is responsible for the area, so a higher level set of eyes gets to look at the complaint. Again, if the complainant is not satisfied with the way in which their complaint has been handled by that individual, then it would go to the ombudsperson. The ombudsperson then opens a file and, obviously, takes in all of the facts and will engage in an internal review of what has happened. The ombudsman is a—. I just want to give you the right information on the reporting structure. The ombudsperson will report to the president and chief executive officer, so that there is visibility at the highest level of the organisation of the complaints that are brought forward to the ombudsman.

Okay, thank you. What do you see the benefits being to both BDC and the complainant of the approach that you've just set out there in handling complaints?

The complaint process is a really important one. We feel very strongly that there has to be transparency about how a complainant can lodge dissatisfaction about BDC with BDC, so, like I said, it is important that the process is made transparent and easily accessible. It also gives us a very important view into, 'What are the things that we may not be doing well?', so we view that as being very important. We do an annual report of complaints as well that our board is given visibility into, so, again, at the highest levels of the organisation we're getting insight into where the complaints are happening and the nature of those complaints on an aggregated basis.

Thank you. Just one final question, more broadly, given that development banks across the world, and here in Wales with the Development Bank of Wales—. I was just wondering whether BDC has learnt or taken or adopted anything that it has seen from other development banks across the world and applied it to BDC's running, or whether you have knowledge of the Development Bank of Wales and its format here in the United Kingdom, especially in Wales, obviously.

I'm fortunate enough, actually, to be the secretary general of a group called the Montreal Group, which is an association of 12 development banks from across the world. BDC is actually a founder, with Bpifrance, the development bank in France, of the Montreal Group, and it was formed to address the exact question that you're asking: what can we learn from other development banks that will accelerate our innovation?

From BDC's perspective, we, over the last 11 years, have learned quite a bit. BDC is mainly, or has been mainly, a direct-to-client business model, meaning that we have about 700 account managers and those account managers meet with businesses across the country and do loans. We do have an online, also, loan-application process, which is becoming increasingly important, but, mainly, our history has been built around a direct model. What we've found in the course of discussions with our peers in the Montreal Group is that many countries have an indirect model, so they provide capital to the SME market in their countries through guarantee programmes, for instance. That's been an area that we have been quite interested in developing. We've learned a lot from counterparts.

I am aware, too, that my colleagues within the Montreal Group, in the secretariat, have begun having conversations with the Development Bank of Wales to discuss potential collaboration, but nothing formalised.

Thank you, Karen, that's really helpful. Thank you, Chair.

Thank you, Sam. Our session has come to an end, so thank you very much indeed for giving up your time today. Your evidence will be very useful and helpful 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, we appreciate you giving up your time to be with us today. Thank you.

It was my pleasure. Thank you.

We'll now take a break to prepare for the next session.

Croeso nôl i gyfarfod o Bwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen, nawr, i eitem 7 ar ein hagenda. A dychwelwn yn awr at y gwaith o gasglu tystiolaeth ar gyfer ein hymchwiliad i'r economi werdd. Yn ein trydydd sesiwn banel heddiw, rŷn ni'n siarad ag amrywiaeth o arbenigwyr annibynnol. Gaf i estyn croeso cynnes i'n tystion i'r sesiwn yma? Cyn ein bod ni'n symud yn syth i gwestiynau, gaf i ofyn iddyn nhw i gyflwyno'u hunain i'r record, ac efallai gallaf i ddechrau gyda Dr Jack Price?

I'm Dr Jack Price. I'm a research associate at the Wales Centre for Public Policy

Ned Hammond.

Hi, everyone. Thank you for having me. I'm Ned Hammond. I'm the head of energy and environment at the think tank, Onward.

Alison Parken.

Hi, everyone. I'm Dr Alison Parken from Cardiff Business School. Excuse the throat.

And Derek Walker.

Good afternoon. I'm Derek Walker. I'm the Future Generations Commissioner for Wales.

Thank you very much indeed for those introductions. I'll kick off the session with just a couple of questions. What is your current assessment of the Welsh Government's approach to the green economy? Who wants to go first on that? Jack, would you like to go first on that?

Thank you. Yes. Just to clarify my role here, the answers I'm going to give are drawn mainly from the published work of the centre, which itself draws on various interviews with key stakeholders and lessons that we've drawn from academic and grey literature. So, I'll try and be clear in my answers which I'm drawing on at which point.

I'm afraid that the answer to this question is that we haven't assessed, in any great detail, the current approach to the green economy, as a centre. We are aware of and want to highlight a couple of areas where we think there is potential at the moment. We find these mainly in areas where there has been co-ordination and planned development investment across local geographies or industries across Wales. So, the south Wales industrial cluster, HyNet in north Wales and some of the investment decisions by the Cardiff capital region we're aware of being particularly helpful.

Thank you. Who else would like to go on this? Derek.

Thank you very much, Chair. My first answer to this is to urge you and the Welsh Government to see the green economy as the whole economy. I think, sometimes, the green economy is seen as a subsection of our economic strategy or economic model, but we know, because of the crisis in our nature systems, because of the climate change crisis that we face, that all of our economy needs to be a green economy. That's about thinking about our economy in terms of its economic impact, but also its effect on social equity and the fact that it doesn't reduce or damage our environment. So, I think that's an important context from my perspective.

In terms of my assessment of some of the Welsh Government's work in this area, I guess, without having done a full analysis, my summary would be, 'Good in parts.' We can point to some very good initiatives, for example, supporting businesses around net zero and so forth. I gave very positive comments on the then economy Minister's new economic mission back in the autumn, which looked to take that broad approach. It talked about using the national well-being indicators as part of the way we measure the success of our economy, which I thought was very welcome, but we need to see that implemented, of course.

My other point was we need to see this right at all levels of the economy, not just within the Welsh Government. So, increasingly at the regional levels, the CJCs, the growth deals, local authorities have responsibility and resources for economic development in Wales, and we need to see this consistent approach to a broader understanding of the impact of economic strategy on our wider well-being taken at all levels of government.

And which green economy sectors do you think Wales has a comparative advantage in, and to what extent are we making the most of potential opportunities in these sectors, do you think? Derek.

Is that for me or for all of us?

Yes, all of you, of course, but, Derek, have you got any views on that?

Yes, I do. The response that I've got to that is not to look particularly at sectors in the way that the question is asked, but, in terms of thinking about the second part of your question, in the way that we approach this. So, I think my sense is that I could give you a list of some of the sectors where you could potentially see growth or jobs created in new businesses in our economy, and others will be able to do a better job of that. But if you think about it through the lens of the well-being of future generations Act, what I think we need to be doing a better job of is of taking a long-term approach to economic strategy and the green economy, as we're calling it here, to understand what the potential is and to ensure Wales is prepared for those changes. I don't think we've always been good enough at looking long term and anticipating where we need to be. So, my predecessor did some work previously on understanding what area of growth we would see in the economy and what skills we would need to have in place in order to meet those new areas of growth. We haven't been good enough at the planning for that and making sure we have the capacity and skills in those areas.

I think, too, we should think more about ownership in this space. So, we want to learn the lessons of the past, and I guess I'm drawing on my previous job at Cwmpas in this regard. We need to draw on the lessons of the past so that when we are harnessing our natural resources for clean energy, for example, the benefit that comes from those natural resources in terms of profit and surplus accrues to those local communities and stays in Wales, and is not exiting our country to benefit big companies in the City of London or elsewhere. So, I think ownership is a key factor in all of this that we need to give proper consideration to and more attention to.

Okay.

Can I come in?

Yes, of course. Yes, absolutely.

You're asking about where we are in terms of the green economy, and I would echo Derek's thinking, and our thinking on the research that we did into an equal and just transition has not only focused on energy, transport, electrification, the decarbonising industries, as we consider that all jobs will change to a certain extent and become more green. There will be a significant amount of job redesign. It won't just be technical skills; it'll be across the whole economy and problem-solving middle skills. And we are in the middle of not only a net-zero economic transition, but also a digital and AI economic transition, and we would agree with Derek that that, obviously, covers changes to the social fabric of the country, and environment and culture as well. But previous economic transitions have not always meant economic growth, and certainly previous economic transitions have not always meant a reduction in inequalities. Unfortunately, Wales has got a long history of understanding how economic transitions when they are not planned in a just way can produce decades of further and intergenerational inequality.

So, we're taking a more whole-economy approach, and what we're seeing is a lot of excitement in the transition, in this change around the future of work in digital, AI and net zero, but a sense of frustration too—a sort of cork in a bottle. Everyone wants to get going. We echo some of the other evidence papers that you've had about the need for a clear plan and clear investment to get the whole thing moving to give people confidence that this transition is coming.

Ned.

Yes, I would agree with what Derek and Alison have said. I think, just in terms of adding to the specific question, I suppose the areas where there are comparative advantages are, in some instances, where there are natural resources that favour the Welsh economy—so, thinking about things like floating offshore wind as a big opportunity, and, in terms of making the most of that, obviously the recent announcement around investment there is very helpful. It was unfortunate that the Contracts for Difference rounds last year were not favourable for this, but it seems like that should be improving. Obviously, that's something that the UK Government is responsible for, but it's something that the Welsh Government can discuss with them.

And then, also, thinking in terms of natural resources, things around sustainable farming and agriculture and the opportunities around natural capital there could be a significant opportunity as we move to new farming systems and new farming payment schemes. Clearly, there have been some challenges around those, but I would say broadly, those at least have the right idea behind them and are sort of the right direction of travel. And then I think other areas where there are potential comparative advantages are where there has been historic industry and, therefore, there is a skills base. So, thinking about things like the possible return of nuclear in the north-west, for example, could be something that the Welsh economy could take advantage of.

Okay, thanks. I'll now bring in Samuel Kurtz. Sam.

Diolch, Cadeirydd. Good afternoon, panel, and thanks for joining us. Ned, sticking with you, if I may, what would you say are the greatest barriers Wales faces in transitioning to a green economy and how do you think these should be addressed?

Yes, sure. In some of the research that we've been doing recently, I think we found—and these are, initially, UK, wider challenges—that it looks like there are five clear gaps that need to be filled if we're going to, basically, provide the foundations for getting private capital into supporting the green economy, and those things that we've identified are public investment, planning, skills, regulation and international relations. I guess a couple of things that we may well come on to over the following questions, but in particular picking up those things around skills and planning, there is a big gap in terms of the resources that we have in those areas compared to what we need for a green economy. So, building up greater planning resources where there are net-zero skills within those, so that they can more quickly make decisions on developments that are needed, both at a small scale in houses all the way through to bigger infrastructure, is really important and a massive challenge. And then developing the skills as well, clearly, as new industries come in—I'm thinking about things like floating offshore wind or the return of nuclear—developing the skills and also enabling people to easily move from one industry to another is going to be a challenge in order to make sure that we've got the workforce in place that we need.

Just picking up on another one of those five things, obviously, public investment is a tricky area, given that budgets are being squeezed and public finances are in a challenging place at the moment, and, obviously, what we would like to see is some more economic growth that would help to improve the position there and allow more public investment. Some of the things around, potentially, planning reform could help that. But also—and maybe we'll get on to this in more detail later on—using things like the UK Infrastructure Bank to help provide some capital that's loosely coming from the public sector, where direct public investment is more tricky, could be an option for trying to address that challenge.

In terms of planning and consenting being a barrier, what suggestions would you give to the Welsh Government to alleviate that?

Yes, sure, I think, first of all, you've got a kind of resourcing challenge where local authorities have had resourcing challenges across lots of different areas, but including planning. I think, in there, there are two things that we would suggest, with the first of those being thinking about planning as a key net zero competency and, therefore, building skills training and things around that. So, if we look at trying to develop education and training establishments that are doing more for net-zero skills, that should absolutely include courses around improving planning.

The other thing on the skills side is that, recently, the UK Government has introduced a planning skills delivery fund for local authorities to provide training for people to build up skills. That's not specifically for net zero—I'm sure some of the local authorities will be using it for that, but something similar in Wales that was more specifically designed towards the green economy and net-zero planning skills could be really interesting.

Okay. Helpful.

The other thing—. Sorry, I'll leave it there.

Are you sure?

I was just going to talk about permitted development rights relieving some of the resourcing challenges, but I won't go into too much detail on that.

Okay, thanks. Jack, anything to add on those two points?

Yes, I think we would echo quite a lot of what Ned said about the barriers, in particular, investment barriers. We think that some of the ways that we could address that are by thinking about ways to pool perhaps investment opportunities, procurement opportunities in particular, looking at lower risk investments, such as heat decarbonisation, electric vehicle charging points and seeing if there are ways to mobilise things like pension funds—to invest in those—and mobilising private finance as well, which will be a key enabler for the transition.

In terms of planning, I think we recognise that the current planning process is time intensive, it's arduous, it's expensive, it's tricky to navigate for a lot of people. The infrastructure Bill, which is passing through at the moment, does go some way, we think, to speeding up the permitting and consenting process for significant infrastructure projects. And we think that taking that approach generally could be a helpful way to unlock new investment, but also increasing the capacity within the system to manage applications.

Two more quick things I want to say about that: firstly is that that shouldn't come at the expense of public engagement with the planning process. We think there are ways to manage planning with greater transparency, trying to front manage and front load engagement as much as possible, which can help to ensure that the public do have a chance to engage with, in a meaningful way, planning applications while not unduly increasing timelines. And the second thing is, drawing on some international case studies that we found in a paper on accelerating deployment of infrastructure projects, there are a couple of interesting ones in there. I'm going to talk about the Dutch Government's approach to offshore wind. So, the Government of the Netherlands preselects consents and gives a grid connection to proposed offshore wind projects all before construction tenders are put out. So, the whole process is in place before the private company bids to build it at all. This helps to reduce risk for the developer, but it's also contributed to a significant increase in offshore wind capacity in the Netherlands. So, there could be potential lessons to draw from that for Wales.

Okay. Helpful. Alison, anything to add?

I don't think so. Not at the moment. Thank you.

Okay. Thank you. Derek, anything on those points? Otherwise, I've got a specific question for you in your capacity as future generations commissioner.

Well, just to say very quickly that I totally agree with what's been said. I think capacity and skills is one of the key issues around planning. And the second biggest area of concern in my postbag is around planning, and it's all about those particular issues. And I think the skills in—how was it described—net-zero competency, but in terms of understanding how you apply the breadth of the well-being of future generations Act to planning decisions is a gap that we need to address in terms of supporting the skills of planning officers.

Okay. Thank you. And staying with you, Derek, you've said that your team will focus on addressing cultural barriers to change, such as, and I'm quoting,

'outdated concepts of economic growth at any cost.'

I'm just wondering how you propose to undertake this work and what support will be needed from the Welsh Government and other organisations to do this.

Yes. So, this comes to the work, I guess, that I'm doing through 'Cymru Can', my strategy document. We wanted to do practical work. The overriding sense from my strategy and my work in coming into this job as the future generations commissioner is closing the gap between ambition and implementation. So, one of the areas in which we will want to be doing some specific work is around supporting public bodies to deliver on this green, well-being economy approach to their economic development. So, what I mentioned earlier is that we are seeing perhaps different approaches being taken at different levels of Government within Wales, and that doesn't make sense to business, but that doesn't also make sense for us as a country in terms of making progress. So, one of the areas of work that we will be doing in that regard is to support public bodies around their well-being objectives to ensure that, when they're thinking about well-being economy objectives, which is part of what they need to be putting in place as part of their work under the well-being of future generations Act, they understand what that means—that broad approach to the economy, as I talked about in the beginning—but also how we use our well-being indicators as measures of success consistently across Wales to understand whether we're making that impact, not just in terms of jobs or traditional approaches, like GDP, but in terms of equity and reaching all parts of our society and not damaging our environment.

So, that would be one example. I think some of the other pieces of work that we're doing—and we may come onto this a bit later—is working with businesses themselves. So, what I've found since coming into this role is businesses are keen to have a consistent approach from across the public sector about what's expected from them from Government. And I think what we should be doing throughout all aspects of Government is when we are supporting businesses—whether it's through an economic contract or through procurement or through grants or finance or whatever it might be—we're consistently asking for them to be thinking in terms of economic, social and environmental impact in contribution and value that they can bring to Welsh society, and not just thinking about one of those aspects each time.

Okay. Thank you, Derek. Any of the panel want to add on that? No. Back to you, Chair. Thank you very much.

Thank you very much. I'll now bring in Hefin David. Hefin.

Diolch, Cadeirydd. I'd like to focus on skills shortages, and one of the things that research I've done has shown is that there's a fragmentation of the sector, particularly between levels of education—primary, secondary, tertiary and higher education—but also between employers and course design and the like. So, do you think the Commission for Tertiary Education and Research—? Perhaps I'll ask Alison first of all. Do you think the Commission for Tertiary Education and Research will help improve that and get, perhaps, employers who are looking to develop skills in the green sector to be able to be involved in the design of things like degree apprenticeships, for example?

'I do hope so', I think, is the answer to that. On the equal and just transition research we did, it was a collaborative approach. We had equality organisations, the trade unions, policy makers and business on a panel looking at how we get the skills we need for net zero. But we took quite a lot of evidence from higher education and further education, who are interested in this area but are not certain of the demand, and that's the issue. Without the demand, they won't put on these courses. And it's a bit of a vicious circle at the moment; without the investment, we can't get the demand, without—. You know. So, they are concerned about training people for jobs that might not be there. So, without offering up the agenda for the new commission, of course they have to have a co-ordinating role here between HE, FE and career services and employers. Yes.

I interviewed the FSB, the Federation of Small Businesses, and the Confederation of British Industry in Wales through the course of my research, and one of the things they said is that employers want to see immediate outcomes, and therefore they tend to disengage because they don't see immediate outcomes, so that kind of bears out what you're saying there.

Yes, we've got a cork in the bottle at the moment. People are ready to go, but they need to know the demand is there, and they need to know what employers want. The evidence that the training providers gave to our panel was that a business will trot along to its local FE college and say, 'Can you put me on a course for my mechanics on how to do battery maintenance?' That's not going to provide the sector shift. We have these estimates don't we, across energy, electrification, transport and other of the decarbonising industries of somewhere between 60,000 and 80,000 new jobs between now and either 2035 or 2040, and a real concern about where those workers are going to come from, and that reskilling and retraining is not going to be enough. So, we've got to have this co-ordinated approach, and again I would say it's also not just in these specialist skills. What I teach, what I research, will change. The way the health service delivers health services will change. In the way that, already, they are changing products so that you don't have gas pumps in ventilators, you have vacuums, everything will change, and we need to have that co-ordinated approach so that net zero and AI is embedded in all future learning and training, and also we can very quickly produce the high numbers of people that we're going to need if we're going to make this a reality.

I'm not going to have any further questions, Chair, but, if anybody else wants to come in, I'd welcome that.

Ned.

Hi. Yes, thank you. So, we had a report out, a couple of years ago now, but I think it's still got something relevant in it. The report was 'Qualifying for the race to net zero', and in that we suggested the creation of net-zero academies, either by existing further education colleges adding those on, or potentially new providers coming into the space. The idea would be that those organisations would train workers in the net-zero-related trades that are needed in their region. It's modelled on a couple of things, one of which really didn't work, and one of which has. So, the first of those that didn't work was the HS2 Academy, and I think the challenge there was that it was potentially too specific and therefore didn't have much demand from people to take up the apprenticeships and other training, whereas the National College for Nuclear seems to have worked pretty well so far. That's trained over 5,000 apprentices since opening in 2018. So, I think there's an opportunity for the Commission for Tertiary Education and Research to look into creating these types of organisations that then would provide those skills, and I think the key is not being too specific so that the demand is very niche, but also obviously not wanting to be too broad either, so that there are specific enough skills that people can use in certain industries. And I would—given that we were talking about planning a minute ago—just add that that would be a similar interesting opportunity where you could add planning skills training into those kinds of organisations.

I should add, Ned, that the Welsh Government has established a degree apprenticeship in rail engineering, which is intended to keep Welsh employees in Wales to run Transport for Wales services. I think that's quite impressive, but I think we need to understand how successful that's been since it's been launched in January.

Yes. Yes, absolutely.

Okay, thank you, Hefin. I'll now bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. If I can stick with the theme of skills, we know and we've heard multiple times there are shortages across different sectors when it comes to skills. If I could first come to Jack, and I'm just thinking about the written evidence the Wales Centre for Public Policy submitted prior to this session. You mentioned the remit of regional skills partnerships in restricting the ability of sectors to actually deliver and develop on green skills. I was wondering if you could elaborate a bit more on that. Is there an important role here for regional skills partnerships to play, and how can they then fulfil that role?

Thank you. Yes, we think there's a very important role for regional skills partnerships to play in bringing business and providers together to help to understand the need for skills provision. We talked about the remit sort of restricting their ability to develop that's particularly in reference to the fact that their remit is for full-time further education or apprenticeship provision. And we think that that does limit the ability they have to respond flexibly to need across the system, so thinking particularly about adult learners, for whom flexible, part-time provision might be particularly important if they're going to access these sorts of courses, but, also, potentially, trying to expand the remit into things like A-levels and higher education, really building on some of the things that Alison's been saying around demand, but also about co-ordination across the system, and trying to make sure that the right courses are there, for the right people, at the right time.

One of the things that you've highlighted was this sort of vicious cycle that there's a perceived lack of demand, but then that lack of demand is created by the perception that these courses aren't available in the first place. I'm just wondering, then, how do we actually tackle that.

So, I think our research, our interviews with people within the sector, suggests that the willingness is there, the preparation is there within the sector to provide these courses. Part of it is this sort of demand from learners, and part of that is driven by consumer demand as well. So, one of the things that we've heard is about heat pump installation. The people who install gas boilers at the moment are less likely to pursue training to re-skill for heat pumps if they don't think the consumer demand is there, but one of the drivers of a lack of consumer demand is the fact that there are no trained engineers. So, in part, it's making sure that the demand is there at the consumer level for the goods and services that people are going to provide as part of the transition, and that will feed into demand for training courses from people within the sectors.

So, essentially, in of our previous evidence sessions today, there was talk of a need for a more holistic and a more joined-up approach by a triangle of different actors—the Government, business and FE providers. That's very much what you would agree with as well, yes?

Yes, I think, absolutely. And I think one of the things that we also heard in the course of our research on net zero skills is about having that direction-setting from the Government in the first instance, so that businesses know what's coming their way and can adapt to that. And that's really important.

Ned, I could see you nodding there. I know Onward have talked about the need for a skills passport and proposed that as an option going forward. I'd be really interested if you can just expand on that a bit more.

Yes, absolutely. So, in research that we've done, we've found that, in many cases, there's quite a high degree of skills transferability between different parts of the energy sector in particular, which we were looking at in this case. This is particularly the case for oil and gas and offshore wind, but there are also other parts of the industry, like power stations and things, where there's transferability as well.

Basically, at the moment, currently, the certifications that are needed in industries like offshore wind make it very hard to transfer from one sector to another. What a skills passport can do is identify where people have the skills and certifications that they need to perform basically similar roles in adjacent industries to the ones they're currently in. That means they won't need to spend the time, and then also, potentially, spend the money as well, in some cases, repeating training that they've already done. But what it also does is identify the specific skills gaps that people have. So, then they'd only need to do bolt-on training where required and then they can transition from the jobs they're currently doing, which, potentially, may no longer exist if things are changing in certain industries, to new jobs more quickly.

There's an example of this happening at the moment in Scotland: there's a skills passport being developed that will only cover the offshore industries, and the programme has taken a bit longer than we expected initially. What we recommended was to make this wider so that there's a broader skills passport across the entire energy sector, and obviously, given that Wales has got ambitions to develop the floating offshore wind industry and there's potentially the return of nuclear on Ynys Môn, then creating a skills passport now could help secure the workforce that is needed in the future.

A couple of things, I think, to think about if the Welsh Government was considering developing this would be, first of all, what approach to take in terms of the development. In Scotland, the training industry is leading the development of this; that could be the way to do it, or the alternative is for the Government to develop it themselves and use the industry as key stakeholders during the project. And then the other thing to think about is whether the Welsh Government wants to develop it themselves, for Wales only, or whether to work with Scotland, where there's one being developed at the moment, and the UK Government, to develop a nationwide skills passport.

Diolch, Ned. Unless anyone has anything to add, I'll hand back to you, Chair.

Derek, very quickly.

Can I just make a quick point? Part of my job is to look at these issues in the round and also look at the trends, and I just wanted to flag the importance of thinking around equality and diversity here, because there is some evidence to suggest that those groups that are already disadvantaged in the workplace could be falling further behind because they're not accessing apprenticeships and skills opportunities to the levels that other groups are—women, disabled people, black, Asian and minority ethnic people. I think this is something to be concerned about and watched to make sure that when we are creating the jobs of the future, or the new jobs in our economy, these groups aren't further disadvantaged by not having access to the skills to help them into these employment opportunities.

Thank you. I'll now bring in Vikki Howells.

Thank you, Chair, and good afternoon to our panel. I'll start with an open question to anyone on the panel who wants to chip in. What are the key aspects that workers, communities and employers will need from a just transition?

I'm going to have a go at that. I think there's a question coming up later around diversity in the workforce, so I won't cover that entirely now, but I would say that one of the things that we discovered when we started working with equality organisations around this area was a lack of understanding of what this means, and so therefore not joining up the equality and net-zero policy areas.

One of our recommendations for a just transition—and I think, to take some of the heat out of this transition, because certain communities who have least could well find themselves paying more here, in terms of their vulnerability around flood and their lack of access to electrified vehicles and things—is that we really need this mass carbon literacy for all as a baseline. Everybody needs to understand what this is about to take some of the fear out of it and to take some of the paralysis out of it, and take some of the feeling of being done to when policies are instituted. I think that that would really help then when we have these local planning considerations, if everybody's got a baseline of knowledge about what this means, what it means to the whole of the country, what it means in their local area, what it might mean for them and what this change could bring to them in terms of positive outcomes. Some way of making sure that we're all on the same page in this conversation, levelling up that conversation, is a good start.

Whenever we have an economic transition, there's a kind of, 'Great, this is brilliant, we will have economic growth'—that's not guaranteed. There really needs to be secure investment and determination to make that happen. The other story that happens with economic transition is not only will we have economic growth, but that will be brilliant for sorting out all the current inequalities that we've got in education and the workforce and we will raise all the boats, if you like. That also hasn't been true of other economic transitions. So, for example, in the transition around the knowledge economy in the first decade of this century, those new, high-tech and science jobs were taken by the demographics who were already in high-tech and science jobs, whereas women and people from black and ethnic minority communities found themselves more overconcentrated in-low paid foundational work and precarious work.

It has to be a just transition that attempts both growth and inclusive growth, if you like. In fact, what we have found in our research is a suggestion that, unless it is inclusive growth, we can't actually meet the net-zero skills targets. There are not enough of the usual suspects to go around. So, without an absolute change in equality of opportunity, a real intervention in workplace inequalities, a proper diversity of representation, with career prospects and the opportunity to progress, we won't create the skills that we need, in fact, to get to the net-zero targets.

I'm just checking if anyone else wants to come in on that, Chair.

I'm happy to say something. We've done, as a centre, quite a lot of work on the concept of a just transition over the years. I think one of the things that we really want to emphasise, again, is about the importance of this long-term co-ordinated thinking. We've talked about using the Well-being of Future Generations (Wales) Act 2015 as a governance framework for the just transition, because it enables this collaboration, this longer term thinking, around a more holistic set of principles. But we also recognise that it's not just about the sorts of governance frameworks that you put in place; it's actually the delivery and the outcomes that people feel on the ground that will make the difference as to whether a transition is just or not.

I think something Alison said, about people not being felt like they've had these things done to them, is really important. There's a broad question around the politics of recognition, making sure that you're doing things in partnership with, and having genuine dialogue with, people who are affected by some of these changes, essentially listening to what people want for themselves, for their local area, for their communities, and then trying to act on it, giving them the sense of agency in their own lives that might be lost, if you're affected by the transition. And that needs to come from everyone; it's not just the Government's job. Employers also need to be prepared to offer support, particularly if they are making redundancies, and, by that same token, by getting employers involved, you also need to give business an enabling environment to establish themselves in these parts of Wales where there is a transition.

Because, as Alison said, again, it's really important to get this right. We know from the last transition in Wales that if it's not managed well, there are bad outcomes. We know that from international examples—Appalachia is one—where transitions away from coal haven't been well managed, but there are also positive examples. Some of our work looks at places like the Ruhr valley and places in Australia where there have been well-managed programmes that seem to have worked, to some extent, to create a just transition.

Can I just quickly add to the point that was being made around using the well-being of future generations Act to guide a just transition? You will know the Welsh Government is consulting, or has just recently consulted, on its just transition framework, to support public bodies and others to understand how they approach a just transition. I think it's a really helpful document, but the point we made, in my response, is the one that Jack made: let's not complicate things, let's use the well-being of future generations Act and the five ways of working as the basis for that framework and that guidance. As Jack was illustrating, involvement is crucial. Involving people in decisions that affect them, and hearing from them about how to support them through a transition, is one of the ways of working. There's a good fit with the well-being of future generations Act, so we need to align it with the just transition framework rather than create something slightly different.

Thank you. If I can ask a question directly to you now, Dr Parken. The 'An equal and just transition to Net Zero' report that you co-authored last year outlined an energy diversity gap in new and existing renewables jobs. What do you think the Welsh Government and others should do to address this?

That was drawing on Pearl-Martinez and Stephens, who have identified already within renewables a reproduction of the existing occupational segregation and segmentation we've already got in the traditional energy and electrified sectors. There are now a number of sector reports—some really good reports from National Grid, from the Construction Industry Training Board and others—that identify a diversity gap. They are talking about the fact that we can't get to the number of jobs that we need by reskilling and retraining the existing workforce. We've got a baby boomer retirement crunch coming of those traditional workforces. We've got young people who are not necessarily going into STEM subjects in the way that we'd want them to.

In a sense, these industries have not been a rational choice for women or people from ethnic minorities, or disabled people, because they've not felt welcome there. So, as we are transitioning to changing the energy sector, what we have to do is make sure that those workplaces operate differently—that they are properly welcoming and inclusive, and that they start from day one bringing people in in a way that allows people with difference to make a difference in the culture that they're working in.

I think it's a bit more than what it sometimes gets reduced to, which is about asking young people, women returners, or perhaps people who left the labour market post COVID in their fifties who now want to come into these sectors, to choose differently. It's about changing the training, who's delivering the training, when the training is delivered, how it's funded, to bring in people who have not seen those sectors as traditionally friendly sectors. But there are some plus points that we can see from lots of the labour market surveys that young people, particularly, want now to work in those careers where they're contributing to better climate outcomes and so on.

I think it's about workplace diversity in a real and proper way, not just the badge on the website. What we learned from our panel is that young people, particularly from ethnic minorities, won't go to those colleges where they feel that they will be treated badly, won't go to those workplaces where they don't feel that they will have a chance to progress. And if you think about gendered occupational segregation, a long tail of that for the last 60 or 70 years, the overconcentration of women in education, health and public services, some of that's a rational choice not to work in those industries where you will not be made to feel welcome or have the chance to progress.

Something's got to change about the new renewables [Correction: 'renewable businesses'] in the way that they operate and genuinely change to address this diversity deficit, because, as I say, without bringing in people who wouldn't normally choose these sectors, we won't get the skills we need.

Thank you. If I can turn to Dr Price now. The paper that you submitted from the Wales Centre for Public Policy notes that the economic geography of the transition to a green economy will be crucial, because it will offer more opportunities in some rural areas, while there is a less optimistic picture for existing industrial areas. So, what policies and approaches should the Welsh Government take to support existing industrial areas through the transition?

Thank you. We said in our evidence as well that there should be bold strategic thinking about how to address this, because we recognise that the geography doesn't necessarily map neatly onto existing industrial areas, but also that people, quite rightly, are often reluctant to leave the areas where they've built their lives, families and communities. One of the things that we've identified is the importance of well-implemented structural adjustment policies, which we discuss in our report on skills for a just transition. This includes targeted support for skills development in line with desired outcomes.

There's an example in that paper from Singapore in the late 1970s, where they actively chased and chose to pursue a high-wage, high-technology framework during one of their previous industrial transitions, which shows the way in which having high ambitions can pay off subsequently. It is an ambitious approach, but that reflects the scale of the challenge as well, not least in the context of the well-known productivity gap that Wales has with the rest of the UK.

Some of the other things that will need to be part of those structural adjustment policies include partnerships with businesses; Government might want to find ways to highlight the advantages of businesses locating in areas where industry is closing, so, good infrastructure and transport links, potentially; the access to a high-skilled workforce that could be retrained and redeployed to other high-skilled jobs in new industries; innovative attempts to incentivise businesses to locate in desired areas. So, again, going back to Australia, which I talked about just now, they had some tax exemptions and reductions in different taxes that were used to incentivise businesses to locate near the closed Hazelwood coal plant. And there are existing programmes, such as the south Wales industrial cluster and HyNet, and the compound semiconductor cluster is another good example of where public-private collaboration has been done already, is being done successfully in Wales, and these can be supported to expand.

And then making sure that there is the support in place for communities beyond just the affected individuals, because the loss of key industries can catalyse, sometimes, a broader sense of decline in local areas. If you ensure that, as part of the transition, there is support for community projects, holistic support for those who are affected by transition, so, not just employment support, but also mental health support, things like that can help to counteract that.

Ultimately, it does have to be about making interventions that aim for economic renewal, economic development and a broad base of prosperity across Wales.

Okay, thank you, Vikki. And before I bring back Hefin David, I'm very conscious of time. We've only got 10 minutes or so to go, so if you could be as succinct as possible, I'd appreciate that very much. Hefin.

What I'll do, Chair, is I'll combine the questions I was going to ask into one question, really, and ask the panel to address that, which is the supply chain, and transitions within the supply chain. One of the things we've heard, for example, is that there are concerns about the future of existing supply chains and the ability to adapt to changes. We've heard that a domestic content requirement should be introduced for net-zero technologies, and we've also heard that supporting local businesses to tender is an important aspect of developing supply chains. So, could we have some comments on those supply chains that are under threat, and how some of these solutions that have been suggested will be effective?

Derek, would you like to start with that?

Yes, I'm happy to cover some of that. I think some of these bits were more in the submissions of others, but some of the points around supporting businesses are key to me. I've been bowled over, I think, by the level of interest from Welsh businesses about the well-being of future generations Act, doing the right thing, planning for the future and thinking about the green economy. But what they've said to me is they want more consistent direction from Government, local authorities and others about what to expect, so that we're talking the same language in all of our public sector organisations, and giving similar expectations in terms of economic contracts, procurement, grants and finance. So, I think that would be something that we could do across Wales that would give some direction and some clarity to our supply chain businesses across the country. But that's just one thing. I'll leave the floor to others.

Ned.

Yes, thanks. I can cover the second and third elements of that, and I'll try and do it quickly. On the domestic content side of things and supporting local supply chains, there are a few different options for what can be done here, but I think the most realistic ones, first of all, are around non-legally binding targets for local content within certain industries. So, at the UK level, there's actually the offshore wind sector deal in 2019, which set a target for the developers to get to 60 per cent lifetime domestic content by 2030. Given that Wales is looking to expand floating offshore wind, and we've seen recently investment in port infrastructure, which is very helpful, as much as possible should be pushing for developers to be ensuring that they're meeting that target as soon as possible, and also putting in place the supply chain plans that are needed in order to reach those goals.

And then the second element, which is a little bit of a kind of lighter, a version of this that can support local businesses, is looking at a model that was used in the Norwegian oil and gas sector. That required companies to give genuine opportunities to local suppliers to secure orders, and also oblige them to inform domestic suppliers and contractors in advance of contract bidding processes actually going live, so that they were aware of them ahead of time. Those kinds of things could help the local suppliers to have greater opportunity to take advantage of these business opportunities.

Alison.

I don't think I've got anything to add there particularly.

Okay. Jack.

I'll come in on the procurement question in particular. One of things that we find is the importance of reflecting the needs of business in Wales, and particularly the high proportion that we've got of SMEs. Often one or two person operations might be qualified to take on contracts, but might not have the capacity or the familiarity to go through the tendering process, so it's finding ways to support people through, whether that's by signposting to support resource that's out there, trying to simplify processes where you can make it easier, and also thinking on behalf of the procuring authorities about taking a stewardship approach to procurement, which is something that we've previously called for in a report, which means a longer term systems approach, carefully considering what should be put out for procurement, why, who can bid for a contract, and using a place-based approach to help develop a local business ecosystem that can meet those needs.

Okay. Thank you, Hefin. I'll now bring in Samuel Kurtz. Sam.

Thanks very much, Chair. Just one quick final question from me on the announcement of the new First Minister this week. He pledged to prioritise supporting the green economy in his manifesto, but what would the panel suggest should be his top investment priority to kick-start that work off, and why? Jack, as you're in the room, we'll start with you.

Thank you. It might not be a surprise at this point to know that my answer is largely about having a longer term co-ordinated approach that seeks to facilitate broad-based economic development. I think, at the start, we heard that the green economy isn't just something separate; it's actually the whole economy. I think I'd like to echo that, but also to add that, actually, a lot of the challenges and a lot of the opportunities in Wales are the same across the whole economy. So, it's about doing that, about targeting investment sufficiently to unlock further private investment and making sure that, when it comes to direct investment, it's in things that are reflecting those priorities: infrastructure connectivity, support for helping businesses to grow, for instance.

Okay. Thank you. Alison.

I think it's investment. We need this public investment to kick-start the private investment. We need this security, as Derek has talked about, and consistency. We need the energy and the confidence, and so we really need to kick-start something here that the private sector can buy into and get on with. I think that that also has to take with it, and bring with it, this new investment in skills and technical abilities, and provide the opportunities in Wales for young people across the board, which they desperately need, so that we can have high-quality decent jobs that keep the value in Wales, and to remember that Wales is not the only country in the world trying to get exactly the same skills; everybody is looking for this set of new skills. It's a global race for talent, and we're not in it at the moment. And when private investment comes in, it will get those skills from wherever in the world it can when it needs them, and it kind of needs them now. So, we've got to get on with it, I think; speed, investment, get this demand going, and build those skills.

Thank you. Ned.

I would agree with what's been said already. I wouldn't say one particular sector over others, but what I would say is that the investment should be prioritised in areas where there are clearly gaps in what the private sector is willing to invest in at the moment, and, as Alison mentioned, the things that the public sector needs to invest in in order to crowd in that investment.

One area that gets mentioned a lot in that is businesses in green technology that are looking to scale up. So, we're quite good at investing in the early-stage research, but getting companies to actually become commercialised we're not so good at. So, that would be one of the areas that I would be looking at most closely across all of the different sectors in the green economy, but in that particular area of companies' expansion journey.

Okay, thank you, Ned. Derek, finally, to you.

Yes, thank you. I would agree. What we need the new First Minister to do is to take this long-term broad approach to our economy, as Jack was saying, but let's frame that according to the well-being of future generations Act, which gives us that direction and also gives us the basket of measures to assess our success, which, remember, doesn't include gross domestic product, but includes a broad range of measures covering different aspects of well-being.

Let me throw in a final thing: wouldn't it be great if the new economy Minister was a well-being economy Minister? I think that would point to a new direction, so that would be very welcome too.

Okay, thank you, Derek. Thank you, Chair.

Thank you very much indeed. I'm afraid that time has beaten us, so thank you very much indeed for being with us this afternoon. Your evidence will be very important to us, as a committee, in this 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 this afternoon.

Fe symudwn ni ymlaen nawr i eitem 8, a dwi'n cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o weddill y cyfarfod. Ydy pawb yn fodlon â hynny? Dwi'n gweld bod Aelodau yn fodlon â hynny, felly mae'r cynnig wedi'i dderbyn ac fe symudwn ni ymlaen i'n sesiwn breifat ni.