August 1, 2024 • 28 mins
As the world moves away from fossil fuels, the electricity grid will need to be able to handle a greater and greater load. In the second installment of Zero’s grid series, Akshat Rathi sits down with Scottish Power CEO Keith Anderson to talk about what that looks like in the UK. They discussed the promise of GB Energy, the challenges of hiring qualified engineers, and what the new Labour government can do to speed up the UK’s energy transition.
Explore further:
- Past Grid Series episode with National Grid’s Sanjeet Sanghera about the challenges of updating the grid around the world
- Past episode about the role of the UK’s Climate Change Committee in shaping net zero policy
- Past episode with Vesta’s CEO Henrik Andersen about the wind industry’s hurdles
Zero is a production of Bloomberg Green. Our producer is Mythili Rao. Special thanks this week to Kira Bindrim, Matthew Griffin, and Anna Mazarakis. Thoughts or suggestions? Email us at zeropod@bloomberg.net. For more coverage of climate change and solutions, visit https://www.bloomberg.com/green.
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Zero. I am Kshatrati. This week the future
of the grid. Today we have part two of the
grid series for Zero and if you got last week's episode,
(00:23):
you heard from Sunjeet Sanghera, a grid expert who used
to work for Bloomberg NEF and recently moved to the
National Grid.
Speaker 2 (00:30):
When I picture the grids, I picture driving on a
long road trip in Canada. On the side of the highway,
you'd see these power lines stringing across the countryside, and
I remember thinking like, we can't possibly be connecting everything
together with these wires. That is exactly what we're doing.
Speaker 1 (00:46):
The question of grid readiness is fundamental to the energy transition,
Why we need to update it, how we update it,
and who is leading the way. This week we talked
to Keith Anderson, the CEO of Scottish Power, a utility
here in the UK, facing these questions as the UK
ushers in a new government, one which is pledged to
(01:09):
create a new entity called gb Energy that's supposed to
give the state a more hands on approach to the
energy transition. Keith has a few ideas about how to
get the UK back on track from meeting its climate goals. Keith,
(01:40):
welcome to the show.
Speaker 3 (01:42):
Thank you. It's great pleasure to be here now.
Speaker 1 (01:45):
As the CEO of Scottish Power, you're responsible for supplying
electricity to four point six million households around the UK.
And one of the things we are going to get
into is what you want to see from the UK government.
But before we do that, I wanted to ask some
broader questions around the grid, around utilities. If you look
(02:07):
at someone in a role like yours, whether it's here
in the UK, or in Indonesia, or in Mexico or
in Croatia, there is something different about being a CEO
of a utility company in twenty twenty four. This is
a very different job from say ten or twenty years ago.
(02:27):
How different is it?
Speaker 3 (02:28):
Well, A lot has changed over the last five ten
years in particular, and I think one of the biggest
things that's changed is people have kind of woken up
to the importance of the grid, woken up to the
importance of how is it we get power to people's homes,
how is it we reconfigure, redesign the grid system for
(02:52):
modern society, and how is it we reinvest in a
grid that was built a long time ago to make
it fit for the future. And I think one of
the biggest things that has changed that debate is this
march towards electrification. If you think about everything that's going
on in modern society, whether it's eves, whether it's the
(03:15):
electrication of heat, data centers, AI, digital technology, everything is
about electrification. And that's why one of the constant phrases
that we use when we're speaking to politicians to governments
is now we're saying to everybody, electrification is unstoppable, because
that's the way we're going. And so the more and
(03:37):
more you realize that, the more and more you realize
how important the grid system is. The other great analogy
we use. It's wonderful having an iPhone, and no point
in having an iPhone if you don't have a charger.
It's the same with an EV it's the same with
a wind farm. If you don't have that grid system,
and you don't have the grid system ready and capable
of dealing with all of that, then none of this works.
Speaker 1 (04:00):
But if we look at the grid, electricity has been
the biggest form of energy being consumed in developed countries
for more than thirty years now, so it's not like
electricity or electrification is new. It's the rate of growth
of electricity use that is new. So is it just that,
(04:23):
you know, developed countries have kind of forgotten how to
build a grid, and now that electrification is causing demand
to grow much faster than it has over the past
few decades, you're facing these new challenges.
Speaker 3 (04:39):
Well, I said, it's a good question and a good challenge.
I think there's a couple of things going on. I
think in a lot of developed countries, whether it was
an established grid system built your forty fifty, sixty seventy
years ago, there's been a little bit of a maintaining
the assets, if you like, sweating the assets, getting the
(04:59):
best value for money out of those assets, and continuing
to use the assets. What what's then happened is the
generation feeding into them has started to change quite dramatically.
We were most of us reliant on systems where we
had big centralized power stations, and we're moving to a
system now of much more distributed generation. So that starts
(05:22):
to create challenges on the grid and the way the
grid system works. The other thing that has gone on
is switching from carbon fuels fossil fuels to renewable energy.
And again that changes the way the entire system works
and the entire system functions because you have to start
(05:42):
balancing in a different way. You need more interconnection, so
you need to start developing your grid. And then the
third bit of it is the electrification. You know, if
you take a country like the UK, UK is quite
often held out quite rightly as being a leader in decarbonization,
but we are not a leader in electrification. With quite
(06:04):
rightly and very importantly focused on decarbonizing the electricity system.
But what we now need to focus on is electrifying
the economy because all of these new technologies and new
industries will look for electricity, data center investors, electrical connection.
And at the same time you've got older industries, more
(06:26):
established industries, and you've got things like the transport system
moving from carbon to non carbon and electrification as well.
Speaker 1 (06:34):
But if we go back to the point you were making,
which is that because of the distributed nature of electricity
generation today and also the variable nature of electricity generation,
the challenges are different. But you know, about a decade
ago when renewables became cheap enough to start to replace
for sol fuel power, either through subsidies or through natural
(06:57):
cost declines. There was this fear that how are we
going to handle thirty forty percent renewables on a grid
that is variable? And now there are days when the
grid is completely powered by renewables. So was that fear
mongering overblown? Was the fear just not rightly placed?
Speaker 3 (07:19):
You always have a when you're moving for one system
to another, you're about to have a bit of uncertainty
and a bit of concern about how do you deal
with that? How do you manage that? I mean, I
can remember back to when people were getting worried about
ten percent renewables in the system or fifteen percent renewables
in the system. But grid technology moves on as well.
The technology, the way you build the grid, the way
(07:39):
you manage the grid, the way you utilize the grid,
the way you design the grid is all changing at
the same time. And also what you've seen lots of
countries do is more and more interconnection, so making the
grid system much much more flexible, allowing you to shift
and move power about. You've also seen the rapid growth
in some countries like the UK offshore wind which helps
(08:01):
to balance off some of the intermittency of onshore when
you've seen the growth of solar, which again helps to
balance that off. So all of these technologies are coming through.
We're seeing a huge growth and battery technology again helping
to balance and manage fluctuations in the system and voltage
control issues in the system. So all those technologies, all
the variability of the technology, all of that investment interconnections
(08:24):
just making it more and more possible and easier and
easier to up the level of renewables in the system
and manage a system in that way. So now you
rarely hear people talk about the concern of what will
happen if the wind doesn't blow one day because the
system is run in such a different way. And that's
been part of the big, big investment program that's going on,
(08:45):
and part of the big investment program that still needs
to come on the grid.
Speaker 1 (08:49):
Now let's come to Great British Energy. This is a
pledge that the Labor Party has made about what it
wants to do in energy. Now, the Labor Party has
been quite veig about what exactly GB energy is going
to be. But from what you know, is this a
welcome development.
Speaker 3 (09:07):
The concept of Great British Energy is fine. I have
absolutely no issue with it at all. In fact, it's
great to have anything being set up or created that
brings a bigger focus on the future of energy and
what energy can do to drive the future of economic
growth in the country. Is a really positive good thing.
So that's brilliant.
Speaker 1 (09:27):
I'm very much focused on electricity, not all that.
Speaker 3 (09:30):
Absolutely, and that's the critical thing. Again, it goes back
to the conversation about electrification. Electrification is unstoppable, okay, So
that's great and brilliant. It's now just about where does
it add greatest value and in which processes, And that's
the debate we need to have and get into the
detail of okay. And that's where the expression comes about.
(09:53):
And I'm not suggesting this is what it is. But
if all it ended up becoming was a bank, then
I'm kind of sitting here, Well, you know what, there's
a hundred banks out there already. I don't need another bank.
If it's involved in looking at policy, if it's involved
in looking at how do we set up the mechanisms
to deliver the hydrogen economy, How do we set up
(10:13):
and encourage the transfer from gas boilers to heat pumps,
How do we make sure there's a better effective rollout
of ev charging and changing ev charging. How do we
use existing schemes like the energy efficiency scheme to direct
the money more to heat pump conversion, etc. Then those
things start to add a huge amount of value. They
(10:34):
start to unlock a huge amount of investment. Right now,
if what the program did was buy shares and offshore
wind farms or take stakes and offshore wind farms, fine,
that's not going to build them any faster. It's not
going to deliver them any faster. So it's really about
where you add best value and the kind of amounts
of money that are being talked about being made available
(10:56):
to bridge energy. Then it's about how do you focus
that And I think innovation and research and development policy
creating the correct mechanisms, creating the right incentives right now,
I think that is where any government coming into power
could add a huge amount of weight and a huge
amount of speed to what we want.
Speaker 1 (11:15):
Well, that doesn't sound like gb Energy Corporation's job. That
just sounds like the government's job. Now, Labor has promised
to decarbonize the grid by twenty thirty.
Speaker 3 (11:24):
Is that realistic targets get set all the time? Okay,
and different governments. Different parties bring along different targets. The
government and the run up to the election had targets.
It changed targets, It made some targets more ambitious, it
chopped others. I generally don't get overly excited about targets
and dates. Having ambitious targets is good. If somebody sets
(11:47):
a target of decarbonizing the grid by twenty thirty or
somebody says there's a target of having fifty gigawats of
offshow win by twenty thirty five, if we end up
with forty eight gigawatts, is that a disaster.
Speaker 1 (11:59):
No.
Speaker 3 (12:00):
If we end up decarbonizing the system by ninety five
percent instead of one hundred percent, is that a disaster.
It's great to have big ambition. It's great to show
the industry, to show the supply chain, to show investors
we are absolutely serious about this and we will put
in place the policies and the mechanisms to allow you
to invest to deliver it. We will focus on speeding
(12:20):
up the planning system and the clarity of the planning
system to allow your projects to come through, to allow
you to push harder and go faster. That's what we
want that's what we like to see. Whether the targets
twenty thirty or twenty thirty three doesn't make much difference
to me as long as I have that ambition, that clarity,
and the policies to back it up.
Speaker 1 (12:40):
Now, there are things that are just called natural monopolies
because of the way in which a particular asset operates.
Typically utilities which are building cables or utilities that are
building pipes, so water or electricity tend to be natural
monopolies that it is all only worth having one set
(13:02):
of pipes and one set of cables to do the job.
But natural monopolies should not exist in a proper capitalist
market where there is competition and that drives prices down
and helps the consumer as well as helps innovation. So
one way around the whole existence of natural monopolies is
(13:22):
to regulate them, and regulate them well. In this country,
poor regulation of water utilities has meant they're now dumping
sewage at scale and have been doing that for years
into rivers into sea utility regulation has been running okay
so far, But what do you think the governments could
(13:45):
do better in regulating your business that would enable the
transition to go faster?
Speaker 3 (13:53):
I think one of the things when we look at
the UK economy and the balance of competition and regulated
our sets, you need to think very very carefully about
which model works best for what kind of investment. I
think the regulated model for grid investment, the way it's
working now with the real system, the five year cycle
of investment is actually encouraging all of the right level
(14:15):
of investment to come through. The system are also built
into that mechanism. There's actually a huge amount of competition, okay,
because if you look at the way all of the
work is procured and the tendering process, there's a massive
amount of competition, and tendering goes on feeding through to
make sure the price that's being paid is market driven
(14:36):
and incredibly efficient and effective, and that feeds into that system.
If you look at the regulator's job, they're managing that
balance between creating the incentive for companies to come forward
invest but managing the scale of that investment and the
impact and the end customer and the fact that we've
got a model that then stretches that out over forty years.
(14:58):
So when you hear people talking about the billions of
pounds we need to invest in the grid that sounds
quite scary to the public about what's that going to
cost me? Well, you start spreading that out over forty years,
you minimize that impact on individuals, and again that's a
great model. And then what you also need to do
with other parts of the market is look at would
(15:19):
competition be a better answer or the correct answer? In
some cases yes and in other cases no. If I
give you a couple of examples, you look at smart
metering or meeting and a decision was made several years
ago in the UK to do that as a competitive process.
I think most people now would look at that and go,
(15:39):
you know what, we made a mistake in the UK. Actually,
if ever there was an asset investment program and a
rollout program that was suited to regulated market, it was
that and would have been far more successful and far
faster at doing it. Where we started the build out
of offshore wind the regulator looked at creating the off
(16:01):
or the offshore transmission market and putting that those assets
out to a competitive process. It's not been bad. It works,
but the question is what benefit has it brought. It's
a lot more complicated, it's a lot more difficult to
do into marriage and I'm not too sure that there's
been a massive upside or a massive benefit. So yeah,
(16:22):
what I always say in conversations with the regulators, don't
do competition for the sake of competition. There has to
be a clear, identifiable benefit in terms right now, when
I look at the future of the grid and what
we're going through in the grid, and if I look
at the future of offshore wind and what we need
to do on offshore wind, the other thing you need
(16:43):
to take into account is we need such a huge
uplift and investment. We're mapping out massive projects both in
the grid and an offshore. Is that a good time
to fundamentally change the model you're using. I would suggest no.
What you need more than anything else right now for
(17:05):
investors and for that kind of pace of growth is stability,
transparency and sensible management of the costs and the returns.
And that I think is more critical right now than
worrying about whether it's regulated or whether it's competitive.
Speaker 1 (17:25):
After the break, it's not just about the grid, it's
also about the people who work on it. Keith explains
why the UK needs more engineers and by the way,
if you like this episode, please take a moment to
rate and review the show on Apple and Spotify. It
will help others find the show. Now. You recently said
(17:50):
that when it comes to the UK making strides and
clean energy, there are easy answers which don't cost money,
and that it frustrates you when those avenues are now
being used. What were you referring to.
Speaker 3 (18:03):
That's it in the context of a conversation about how
much money does the government need to put into this
and into the future? Okay, And you know what I
would say is, you know, if you look at the
UK specifically, what is quite clear is that fiscally there
are constraints in terms of where our economy sits and
therefore how much money the government can put forward into
(18:24):
the economy. Okay, in terms of what's called Great British Energy.
I don't need or want another bank, so I'm not
chasing this government looking for money. Okay. There are good
regulatory mechanisms in the UK that encourage and allow investment
to flow through the grid. There are some great market
mechanisms like the CFD that encourage and allow money to
(18:45):
flow through to allow the buildout of onshore wind, offshore
wind and solar. So those mechanisms are great. What is
it we need now is we need to look at
what other blockages are in the system. If I look
at this from the perspective of my company of Scottish Power,
we're part of the a Bodrolla Group. Right now I
can attract twenty to twenty five percent of the air
(19:05):
Bodrolla Group's capital into the UK to invest in the
UK system. I should be able to attract even more
of that. What's the constraint speed? What the speed come
down to? More often than not, it comes down to
things like the planning system. So let's invest in modernizing
the planning system. We've talked about modernization of the grid,
(19:25):
We've talked about modernization of the generation system. What's not
being modernized as the planning system. We're still operating the
same system of all was operated. We need to get
faster at getting things through that planning system. Now. Part
of that is more resource in the planning system. Part
of it's the coordination of the planning system with other
(19:46):
bodies and other stakeholders. Part of it's not running it
as a serial process, run it as a parallel process.
There are a whole load of things like that that
can be massively improved. That will allow decisions to be
much clearer, decisions to be made much faster, and allow
projects to get up and be running much much quicker.
So those things you do not need hundreds of millions
(20:09):
of pounds to resolve those kinds of issues. Okay, they're
also things like new technologies coming into the market, and
that's where governments can really help is how do you
create the right policy framework and policy environment. How do
you create the right incentives to start allowing things like
the rollout of ev charging. How do you do the
(20:30):
same thing for the rollout of heat pumps to shift
away from gas boilers to the electrification of heating. How
do you look at and encourage the growth and the
development of the hydrogen sector. Again, from that perspective, we're
not looking for huge amounts of money. A lot of
that is about policy frameworks, market incentives, obligations to start
(20:52):
invigorating those markets and encouraging investment in those markets.
Speaker 1 (20:57):
Another missing piece that you've pointed out is skills. Now,
skills can mean lots of different things, and getting those
skills can also mean lots of different things. It could
be universities, it could be companies taking on reskilling programs,
but specifically, what skills are missing from the workforce right
(21:18):
now and who are the actors that can help bridge
that gap.
Speaker 3 (21:23):
Yeah, people, skills, jobs is a massive part of this
conundrum and of the challenge and the opportunity. So what
do we mean by that? This is about getting people engineers.
That covers a multitude of sins or opportunities. But that
is from people who will be outfitting smart meters. It
(21:45):
will be people jointing cables. It will be people stringing gridlines.
It will be people designing and building wind turbines. It
will be people designing and building foundations. It will be
people designing and building converter stations. In HVD we see
subse cables, Okay. It covers a massive range of skills
what we see when we look at the growth even
(22:06):
if you just take the grid Okay. National Grid have
announced a sixty billion pound investment program. We've announced out
to twenty twenty six, a twelve to fifteen billion pound
investment program. There are massive programs of investment out there,
and one of the main parts we need the physical material.
The other bit is the people to do the work.
(22:28):
And there aren't enough of them right now, and there
aren't enough of them at the trainee level, and there
aren't enough of them at the fully skilled experienced level. Okay,
so what do we need to do? We as an
individual company, we have a big role to play in that.
So we run an apprenticeship scheme, we're on graduate training schemes,
(22:49):
we go out and do employment schemes, we do gray training,
and every company can look at doing that, but on
its own that's not going to be enough. So we
need a coordinated approach with the government. Local colleges. Colleges
play a massive part of this. You know, this isn't
just about universities, schools and universities, and we need to
(23:11):
look at the concept of setting up training academies, shared
training academies. Okay, because right now I'm looking to employ
another thousand engineers. My counterparts at SSEE are looking to
employ on other thousand engineers, and my counterparts on National
Grid are looking to employ another thousand engineers. In fact,
(23:32):
I think right now in and around central Scotland we're
all looking for about two and a half thousand engineers.
There are not two and a half thousand unemployed engineers
in Central Scotland. So if we don't do anything differently,
we'll just run around stealing staff from each other. You
put on top of that all of the supply chain
companies we use, so the cable manufacturers, the civil engineering businesses,
(23:55):
the environmental consultancy businesses we use, and all of this
subcontractors we use. They're also all out looking for staff
as this workload roads grows. So this concept of creating
joint training academies where we put hundreds of people into them,
train them up, and then we can deploy them and
(24:15):
share the resource through the supply chain, share the resource
through the utility companies.
Speaker 1 (24:21):
But if it's a shared resource for training, that could
just be done between companies, why do you need the
government involved.
Speaker 3 (24:28):
I just think, you know, it's important to get the
government involved, just from the point of view, because you
need to then get all of the colleges involved. You
need to get the schools involved in feeding people into
that program as well. So that involves making sure that
the school program is set up and designed to feed
people into it, that the college programs set up and
designed to help train and run some of the training,
(24:51):
and that you aren't creating another initiative on top of
fifteen initiatives that are already be run by other bodies.
It needs a huge amount of coordination to deliver it.
Speaker 1 (25:02):
I know you're not an education policy expert, but I
wonder what kind of specific interventions in schools, colleges, universities
you think need to be made to help reduce the
struggle that your company has to hire the right people.
Speaker 3 (25:18):
A couple of things on that. I think will's talk
about stem about the sciences, about maths, about physics, and
it's a great thing to focus on. And the more
the more we can encourage children to be studying or
getting involved in those subjects is hugely beneficial to the
future of our economy, not just from the energy sector
or the electricity sector, right across the whole of the economy.
(25:40):
Those skills are fundamental in so many areas. What is
as important, I think, though, is getting into primary schools,
and I think you need to start this at primary
schools and also educating the teachers and educating parents about
what's happening and what opportunities there are in the future.
(26:03):
I think right now, if you wander around primary schools
or go and speak to parents and talk about Oh
have you thought about engineering? I think you would end
up if you asked ten parents or ten teachers what
they thought about the future of engineering, you would get
a very wide and weird array of answers from is
(26:26):
that something to do with getting your hands dirty fixing
the underneath of a car? In this country culturally, I
wouldn't fully appreciate and don't hold the engineering profession up
to the same level as the accountancy profession, the medical profession,
or the legal profession. It's almost at a level below it,
I would argue, and I'm not an engineer, I would
(26:48):
argue today that engineering profession should be above all of
those other professions because of its criticality to the future
of this country. Whether you're looking at it from things,
whether you're looking at from infrastructure, whether you're looking at
it from digital technology. We need more people learning those
skill sets, understanding those skill sets, and delivering the future
(27:11):
of the country.
Speaker 1 (27:12):
Thank you, Keithan, thank you, thank you for listening to zero.
And next week, on the last installment of our grid series,
we'll hear from the founder and CEO of DS Conductor,
Jason Holan.
Speaker 4 (27:29):
Fundamentally, progress in conductor is dependent on material science programs.
But when you have better conductors, you also have to
check the box for the utility in terms of their
concern on practicality, safety, reliability, longevity, easy to work with.
Value is not easy.
Speaker 1 (27:50):
He explains why breakthrough technology is just step one when
it comes to updating the grid. And now, for those
who wait till the end, the sound of the week,
that is the sound of a win turbine turning slowly.
(28:13):
If you like this episode, please take a moment to
rate or review the show on Apple Podcasts and Spotify.
Share this episode with a friend or with a primary
school teacher. You can get in touch at zero pod
at Bloomberg dot net. Zero's producer is Mighty Lerau. Bloomberg's
head of podcast is Sage Bauman and head of Talk
is Brendan Nunan. Our theme music is composed by Wonderly
(28:36):
Special thanks to Kira bindram Anamazarakis and Matthew Griffith, i
am Akshatrati back So
Welcome to Zero. I am Kshatrati. This week the future
of the grid. Today we have part two of the
grid series for Zero and if you got last week's episode,
(00:23):
you heard from Sunjeet Sanghera, a grid expert who used
to work for Bloomberg NEF and recently moved to the
National Grid.
Speaker 2 (00:30):
When I picture the grids, I picture driving on a
long road trip in Canada. On the side of the highway,
you'd see these power lines stringing across the countryside, and
I remember thinking like, we can't possibly be connecting everything
together with these wires. That is exactly what we're doing.
Speaker 1 (00:46):
The question of grid readiness is fundamental to the energy transition,
Why we need to update it, how we update it,
and who is leading the way. This week we talked
to Keith Anderson, the CEO of Scottish Power, a utility
here in the UK, facing these questions as the UK
ushers in a new government, one which is pledged to
(01:09):
create a new entity called gb Energy that's supposed to
give the state a more hands on approach to the
energy transition. Keith has a few ideas about how to
get the UK back on track from meeting its climate goals. Keith,
(01:40):
welcome to the show.
Speaker 3 (01:42):
Thank you. It's great pleasure to be here now.
Speaker 1 (01:45):
As the CEO of Scottish Power, you're responsible for supplying
electricity to four point six million households around the UK.
And one of the things we are going to get
into is what you want to see from the UK government.
But before we do that, I wanted to ask some
broader questions around the grid, around utilities. If you look
(02:07):
at someone in a role like yours, whether it's here
in the UK, or in Indonesia, or in Mexico or
in Croatia, there is something different about being a CEO
of a utility company in twenty twenty four. This is
a very different job from say ten or twenty years ago.
(02:27):
How different is it?
Speaker 3 (02:28):
Well, A lot has changed over the last five ten
years in particular, and I think one of the biggest
things that's changed is people have kind of woken up
to the importance of the grid, woken up to the
importance of how is it we get power to people's homes,
how is it we reconfigure, redesign the grid system for
(02:52):
modern society, and how is it we reinvest in a
grid that was built a long time ago to make
it fit for the future. And I think one of
the biggest things that has changed that debate is this
march towards electrification. If you think about everything that's going
on in modern society, whether it's eves, whether it's the
(03:15):
electrication of heat, data centers, AI, digital technology, everything is
about electrification. And that's why one of the constant phrases
that we use when we're speaking to politicians to governments
is now we're saying to everybody, electrification is unstoppable, because
that's the way we're going. And so the more and
(03:37):
more you realize that, the more and more you realize
how important the grid system is. The other great analogy
we use. It's wonderful having an iPhone, and no point
in having an iPhone if you don't have a charger.
It's the same with an EV it's the same with
a wind farm. If you don't have that grid system,
and you don't have the grid system ready and capable
of dealing with all of that, then none of this works.
Speaker 1 (04:00):
But if we look at the grid, electricity has been
the biggest form of energy being consumed in developed countries
for more than thirty years now, so it's not like
electricity or electrification is new. It's the rate of growth
of electricity use that is new. So is it just that,
(04:23):
you know, developed countries have kind of forgotten how to
build a grid, and now that electrification is causing demand
to grow much faster than it has over the past
few decades, you're facing these new challenges.
Speaker 3 (04:39):
Well, I said, it's a good question and a good challenge.
I think there's a couple of things going on. I
think in a lot of developed countries, whether it was
an established grid system built your forty fifty, sixty seventy
years ago, there's been a little bit of a maintaining
the assets, if you like, sweating the assets, getting the
(04:59):
best value for money out of those assets, and continuing
to use the assets. What what's then happened is the
generation feeding into them has started to change quite dramatically.
We were most of us reliant on systems where we
had big centralized power stations, and we're moving to a
system now of much more distributed generation. So that starts
(05:22):
to create challenges on the grid and the way the
grid system works. The other thing that has gone on
is switching from carbon fuels fossil fuels to renewable energy.
And again that changes the way the entire system works
and the entire system functions because you have to start
(05:42):
balancing in a different way. You need more interconnection, so
you need to start developing your grid. And then the
third bit of it is the electrification. You know, if
you take a country like the UK, UK is quite
often held out quite rightly as being a leader in decarbonization,
but we are not a leader in electrification. With quite
(06:04):
rightly and very importantly focused on decarbonizing the electricity system.
But what we now need to focus on is electrifying
the economy because all of these new technologies and new
industries will look for electricity, data center investors, electrical connection.
And at the same time you've got older industries, more
(06:26):
established industries, and you've got things like the transport system
moving from carbon to non carbon and electrification as well.
Speaker 1 (06:34):
But if we go back to the point you were making,
which is that because of the distributed nature of electricity
generation today and also the variable nature of electricity generation,
the challenges are different. But you know, about a decade
ago when renewables became cheap enough to start to replace
for sol fuel power, either through subsidies or through natural
(06:57):
cost declines. There was this fear that how are we
going to handle thirty forty percent renewables on a grid
that is variable? And now there are days when the
grid is completely powered by renewables. So was that fear
mongering overblown? Was the fear just not rightly placed?
Speaker 3 (07:19):
You always have a when you're moving for one system
to another, you're about to have a bit of uncertainty
and a bit of concern about how do you deal
with that? How do you manage that? I mean, I
can remember back to when people were getting worried about
ten percent renewables in the system or fifteen percent renewables
in the system. But grid technology moves on as well.
The technology, the way you build the grid, the way
(07:39):
you manage the grid, the way you utilize the grid,
the way you design the grid is all changing at
the same time. And also what you've seen lots of
countries do is more and more interconnection, so making the
grid system much much more flexible, allowing you to shift
and move power about. You've also seen the rapid growth
in some countries like the UK offshore wind which helps
(08:01):
to balance off some of the intermittency of onshore when
you've seen the growth of solar, which again helps to
balance that off. So all of these technologies are coming through.
We're seeing a huge growth and battery technology again helping
to balance and manage fluctuations in the system and voltage
control issues in the system. So all those technologies, all
the variability of the technology, all of that investment interconnections
(08:24):
just making it more and more possible and easier and
easier to up the level of renewables in the system
and manage a system in that way. So now you
rarely hear people talk about the concern of what will
happen if the wind doesn't blow one day because the
system is run in such a different way. And that's
been part of the big, big investment program that's going on,
(08:45):
and part of the big investment program that still needs
to come on the grid.
Speaker 1 (08:49):
Now let's come to Great British Energy. This is a
pledge that the Labor Party has made about what it
wants to do in energy. Now, the Labor Party has
been quite veig about what exactly GB energy is going
to be. But from what you know, is this a
welcome development.
Speaker 3 (09:07):
The concept of Great British Energy is fine. I have
absolutely no issue with it at all. In fact, it's
great to have anything being set up or created that
brings a bigger focus on the future of energy and
what energy can do to drive the future of economic
growth in the country. Is a really positive good thing.
So that's brilliant.
Speaker 1 (09:27):
I'm very much focused on electricity, not all that.
Speaker 3 (09:30):
Absolutely, and that's the critical thing. Again, it goes back
to the conversation about electrification. Electrification is unstoppable, okay, So
that's great and brilliant. It's now just about where does
it add greatest value and in which processes, And that's
the debate we need to have and get into the
detail of okay. And that's where the expression comes about.
(09:53):
And I'm not suggesting this is what it is. But
if all it ended up becoming was a bank, then
I'm kind of sitting here, Well, you know what, there's
a hundred banks out there already. I don't need another bank.
If it's involved in looking at policy, if it's involved
in looking at how do we set up the mechanisms
to deliver the hydrogen economy, How do we set up
(10:13):
and encourage the transfer from gas boilers to heat pumps,
How do we make sure there's a better effective rollout
of ev charging and changing ev charging. How do we
use existing schemes like the energy efficiency scheme to direct
the money more to heat pump conversion, etc. Then those
things start to add a huge amount of value. They
(10:34):
start to unlock a huge amount of investment. Right now,
if what the program did was buy shares and offshore
wind farms or take stakes and offshore wind farms, fine,
that's not going to build them any faster. It's not
going to deliver them any faster. So it's really about
where you add best value and the kind of amounts
of money that are being talked about being made available
(10:56):
to bridge energy. Then it's about how do you focus
that And I think innovation and research and development policy
creating the correct mechanisms, creating the right incentives right now,
I think that is where any government coming into power
could add a huge amount of weight and a huge
amount of speed to what we want.
Speaker 1 (11:15):
Well, that doesn't sound like gb Energy Corporation's job. That
just sounds like the government's job. Now, Labor has promised
to decarbonize the grid by twenty thirty.
Speaker 3 (11:24):
Is that realistic targets get set all the time? Okay,
and different governments. Different parties bring along different targets. The
government and the run up to the election had targets.
It changed targets, It made some targets more ambitious, it
chopped others. I generally don't get overly excited about targets
and dates. Having ambitious targets is good. If somebody sets
(11:47):
a target of decarbonizing the grid by twenty thirty or
somebody says there's a target of having fifty gigawats of
offshow win by twenty thirty five, if we end up
with forty eight gigawatts, is that a disaster.
Speaker 1 (11:59):
No.
Speaker 3 (12:00):
If we end up decarbonizing the system by ninety five
percent instead of one hundred percent, is that a disaster.
It's great to have big ambition. It's great to show
the industry, to show the supply chain, to show investors
we are absolutely serious about this and we will put
in place the policies and the mechanisms to allow you
to invest to deliver it. We will focus on speeding
(12:20):
up the planning system and the clarity of the planning
system to allow your projects to come through, to allow
you to push harder and go faster. That's what we
want that's what we like to see. Whether the targets
twenty thirty or twenty thirty three doesn't make much difference
to me as long as I have that ambition, that clarity,
and the policies to back it up.
Speaker 1 (12:40):
Now, there are things that are just called natural monopolies
because of the way in which a particular asset operates.
Typically utilities which are building cables or utilities that are
building pipes, so water or electricity tend to be natural
monopolies that it is all only worth having one set
(13:02):
of pipes and one set of cables to do the job.
But natural monopolies should not exist in a proper capitalist
market where there is competition and that drives prices down
and helps the consumer as well as helps innovation. So
one way around the whole existence of natural monopolies is
(13:22):
to regulate them, and regulate them well. In this country,
poor regulation of water utilities has meant they're now dumping
sewage at scale and have been doing that for years
into rivers into sea utility regulation has been running okay
so far, But what do you think the governments could
(13:45):
do better in regulating your business that would enable the
transition to go faster?
Speaker 3 (13:53):
I think one of the things when we look at
the UK economy and the balance of competition and regulated
our sets, you need to think very very carefully about
which model works best for what kind of investment. I
think the regulated model for grid investment, the way it's
working now with the real system, the five year cycle
of investment is actually encouraging all of the right level
(14:15):
of investment to come through. The system are also built
into that mechanism. There's actually a huge amount of competition, okay,
because if you look at the way all of the
work is procured and the tendering process, there's a massive
amount of competition, and tendering goes on feeding through to
make sure the price that's being paid is market driven
(14:36):
and incredibly efficient and effective, and that feeds into that system.
If you look at the regulator's job, they're managing that
balance between creating the incentive for companies to come forward
invest but managing the scale of that investment and the
impact and the end customer and the fact that we've
got a model that then stretches that out over forty years.
(14:58):
So when you hear people talking about the billions of
pounds we need to invest in the grid that sounds
quite scary to the public about what's that going to
cost me? Well, you start spreading that out over forty years,
you minimize that impact on individuals, and again that's a
great model. And then what you also need to do
with other parts of the market is look at would
(15:19):
competition be a better answer or the correct answer? In
some cases yes and in other cases no. If I
give you a couple of examples, you look at smart
metering or meeting and a decision was made several years
ago in the UK to do that as a competitive process.
I think most people now would look at that and go,
(15:39):
you know what, we made a mistake in the UK. Actually,
if ever there was an asset investment program and a
rollout program that was suited to regulated market, it was
that and would have been far more successful and far
faster at doing it. Where we started the build out
of offshore wind the regulator looked at creating the off
(16:01):
or the offshore transmission market and putting that those assets
out to a competitive process. It's not been bad. It works,
but the question is what benefit has it brought. It's
a lot more complicated, it's a lot more difficult to
do into marriage and I'm not too sure that there's
been a massive upside or a massive benefit. So yeah,
(16:22):
what I always say in conversations with the regulators, don't
do competition for the sake of competition. There has to
be a clear, identifiable benefit in terms right now, when
I look at the future of the grid and what
we're going through in the grid, and if I look
at the future of offshore wind and what we need
to do on offshore wind, the other thing you need
(16:43):
to take into account is we need such a huge
uplift and investment. We're mapping out massive projects both in
the grid and an offshore. Is that a good time
to fundamentally change the model you're using. I would suggest no.
What you need more than anything else right now for
(17:05):
investors and for that kind of pace of growth is stability,
transparency and sensible management of the costs and the returns.
And that I think is more critical right now than
worrying about whether it's regulated or whether it's competitive.
Speaker 1 (17:25):
After the break, it's not just about the grid, it's
also about the people who work on it. Keith explains
why the UK needs more engineers and by the way,
if you like this episode, please take a moment to
rate and review the show on Apple and Spotify. It
will help others find the show. Now. You recently said
(17:50):
that when it comes to the UK making strides and
clean energy, there are easy answers which don't cost money,
and that it frustrates you when those avenues are now
being used. What were you referring to.
Speaker 3 (18:03):
That's it in the context of a conversation about how
much money does the government need to put into this
and into the future? Okay, And you know what I
would say is, you know, if you look at the
UK specifically, what is quite clear is that fiscally there
are constraints in terms of where our economy sits and
therefore how much money the government can put forward into
(18:24):
the economy. Okay, in terms of what's called Great British Energy.
I don't need or want another bank, so I'm not
chasing this government looking for money. Okay. There are good
regulatory mechanisms in the UK that encourage and allow investment
to flow through the grid. There are some great market
mechanisms like the CFD that encourage and allow money to
(18:45):
flow through to allow the buildout of onshore wind, offshore
wind and solar. So those mechanisms are great. What is
it we need now is we need to look at
what other blockages are in the system. If I look
at this from the perspective of my company of Scottish Power,
we're part of the a Bodrolla Group. Right now I
can attract twenty to twenty five percent of the air
(19:05):
Bodrolla Group's capital into the UK to invest in the
UK system. I should be able to attract even more
of that. What's the constraint speed? What the speed come
down to? More often than not, it comes down to
things like the planning system. So let's invest in modernizing
the planning system. We've talked about modernization of the grid,
(19:25):
We've talked about modernization of the generation system. What's not
being modernized as the planning system. We're still operating the
same system of all was operated. We need to get
faster at getting things through that planning system. Now. Part
of that is more resource in the planning system. Part
of it's the coordination of the planning system with other
(19:46):
bodies and other stakeholders. Part of it's not running it
as a serial process, run it as a parallel process.
There are a whole load of things like that that
can be massively improved. That will allow decisions to be
much clearer, decisions to be made much faster, and allow
projects to get up and be running much much quicker.
So those things you do not need hundreds of millions
(20:09):
of pounds to resolve those kinds of issues. Okay, they're
also things like new technologies coming into the market, and
that's where governments can really help is how do you
create the right policy framework and policy environment. How do
you create the right incentives to start allowing things like
the rollout of ev charging. How do you do the
(20:30):
same thing for the rollout of heat pumps to shift
away from gas boilers to the electrification of heating. How
do you look at and encourage the growth and the
development of the hydrogen sector. Again, from that perspective, we're
not looking for huge amounts of money. A lot of
that is about policy frameworks, market incentives, obligations to start
(20:52):
invigorating those markets and encouraging investment in those markets.
Speaker 1 (20:57):
Another missing piece that you've pointed out is skills. Now,
skills can mean lots of different things, and getting those
skills can also mean lots of different things. It could
be universities, it could be companies taking on reskilling programs,
but specifically, what skills are missing from the workforce right
(21:18):
now and who are the actors that can help bridge
that gap.
Speaker 3 (21:23):
Yeah, people, skills, jobs is a massive part of this
conundrum and of the challenge and the opportunity. So what
do we mean by that? This is about getting people engineers.
That covers a multitude of sins or opportunities. But that
is from people who will be outfitting smart meters. It
(21:45):
will be people jointing cables. It will be people stringing gridlines.
It will be people designing and building wind turbines. It
will be people designing and building foundations. It will be
people designing and building converter stations. In HVD we see
subse cables, Okay. It covers a massive range of skills
what we see when we look at the growth even
(22:06):
if you just take the grid Okay. National Grid have
announced a sixty billion pound investment program. We've announced out
to twenty twenty six, a twelve to fifteen billion pound
investment program. There are massive programs of investment out there,
and one of the main parts we need the physical material.
The other bit is the people to do the work.
(22:28):
And there aren't enough of them right now, and there
aren't enough of them at the trainee level, and there
aren't enough of them at the fully skilled experienced level. Okay,
so what do we need to do? We as an
individual company, we have a big role to play in that.
So we run an apprenticeship scheme, we're on graduate training schemes,
(22:49):
we go out and do employment schemes, we do gray training,
and every company can look at doing that, but on
its own that's not going to be enough. So we
need a coordinated approach with the government. Local colleges. Colleges
play a massive part of this. You know, this isn't
just about universities, schools and universities, and we need to
(23:11):
look at the concept of setting up training academies, shared
training academies. Okay, because right now I'm looking to employ
another thousand engineers. My counterparts at SSEE are looking to
employ on other thousand engineers, and my counterparts on National
Grid are looking to employ another thousand engineers. In fact,
(23:32):
I think right now in and around central Scotland we're
all looking for about two and a half thousand engineers.
There are not two and a half thousand unemployed engineers
in Central Scotland. So if we don't do anything differently,
we'll just run around stealing staff from each other. You
put on top of that all of the supply chain
companies we use, so the cable manufacturers, the civil engineering businesses,
(23:55):
the environmental consultancy businesses we use, and all of this
subcontractors we use. They're also all out looking for staff
as this workload roads grows. So this concept of creating
joint training academies where we put hundreds of people into them,
train them up, and then we can deploy them and
(24:15):
share the resource through the supply chain, share the resource
through the utility companies.
Speaker 1 (24:21):
But if it's a shared resource for training, that could
just be done between companies, why do you need the
government involved.
Speaker 3 (24:28):
I just think, you know, it's important to get the
government involved, just from the point of view, because you
need to then get all of the colleges involved. You
need to get the schools involved in feeding people into
that program as well. So that involves making sure that
the school program is set up and designed to feed
people into it, that the college programs set up and
designed to help train and run some of the training,
(24:51):
and that you aren't creating another initiative on top of
fifteen initiatives that are already be run by other bodies.
It needs a huge amount of coordination to deliver it.
Speaker 1 (25:02):
I know you're not an education policy expert, but I
wonder what kind of specific interventions in schools, colleges, universities
you think need to be made to help reduce the
struggle that your company has to hire the right people.
Speaker 3 (25:18):
A couple of things on that. I think will's talk
about stem about the sciences, about maths, about physics, and
it's a great thing to focus on. And the more
the more we can encourage children to be studying or
getting involved in those subjects is hugely beneficial to the
future of our economy, not just from the energy sector
or the electricity sector, right across the whole of the economy.
(25:40):
Those skills are fundamental in so many areas. What is
as important, I think, though, is getting into primary schools,
and I think you need to start this at primary
schools and also educating the teachers and educating parents about
what's happening and what opportunities there are in the future.
(26:03):
I think right now, if you wander around primary schools
or go and speak to parents and talk about Oh
have you thought about engineering? I think you would end
up if you asked ten parents or ten teachers what
they thought about the future of engineering, you would get
a very wide and weird array of answers from is
(26:26):
that something to do with getting your hands dirty fixing
the underneath of a car? In this country culturally, I
wouldn't fully appreciate and don't hold the engineering profession up
to the same level as the accountancy profession, the medical profession,
or the legal profession. It's almost at a level below it,
I would argue, and I'm not an engineer, I would
(26:48):
argue today that engineering profession should be above all of
those other professions because of its criticality to the future
of this country. Whether you're looking at it from things,
whether you're looking at from infrastructure, whether you're looking at
it from digital technology. We need more people learning those
skill sets, understanding those skill sets, and delivering the future
(27:11):
of the country.
Speaker 1 (27:12):
Thank you, Keithan, thank you, thank you for listening to zero.
And next week, on the last installment of our grid series,
we'll hear from the founder and CEO of DS Conductor,
Jason Holan.
Speaker 4 (27:29):
Fundamentally, progress in conductor is dependent on material science programs.
But when you have better conductors, you also have to
check the box for the utility in terms of their
concern on practicality, safety, reliability, longevity, easy to work with.
Value is not easy.
Speaker 1 (27:50):
He explains why breakthrough technology is just step one when
it comes to updating the grid. And now, for those
who wait till the end, the sound of the week,
that is the sound of a win turbine turning slowly.
(28:13):
If you like this episode, please take a moment to
rate or review the show on Apple Podcasts and Spotify.
Share this episode with a friend or with a primary
school teacher. You can get in touch at zero pod
at Bloomberg dot net. Zero's producer is Mighty Lerau. Bloomberg's
head of podcast is Sage Bauman and head of Talk
is Brendan Nunan. Our theme music is composed by Wonderly
(28:36):
Special thanks to Kira bindram Anamazarakis and Matthew Griffith, i
am Akshatrati back So
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