Clean Power 2030: Inside Mission Control with Chris Stark

I'm your host, Ed Porter. Welcome back to transmission. Right now, the UK is attempting the biggest grid build since the nineteen sixties on a political deadline while simultaneously rewriting the rules of the market. Most of the decisions that will shape the next decade of British energy are being made in the next eighteen months. My guest today is Chris Stark, head of Mission Control for Clean Power twenty thirty. The government task force delivering those decisions and setting the UK up for a clean energy future. Few people have a clearer view of what's coming, and even fewer are willing to talk about it this openly. If you have questions during the episode about constraint costs, new wholesale CFDs, or how the UK grid is being rewired in real time, those are exactly the type of questions Co, Motor Energy's AI, is built to answer. Now back to the episode. Let's jump in. Hello, Chris. Welcome to transmission. Hi, Ed. I'm very glad to be here. Excellent. And our our pleasure to have you. So as ever, let's get straight into it. So what is the one thing that everyone gets wrong about mission control? Well, I think people think of me in mission control as if I'm sort of sitting up with a load of dials around me and a big control desk, and the reality is it's not quite like that. So I think that is probably the the one thing that people get wrong. You might remember a few years ago, there was a thing in the Times with Dominic Cummings standing in a big room, the giant version of Dominic Cummings and lots of little people. It's not like that either. It's much more like an office space where we have some very large screens. You've been in that room and we use them we use them a lot actually to to look at what's going on in the system, but it's not a control room. Okay. But that is it's mostly to track what's happening. Right? Yeah. And so maybe just to to to get into that a little bit, like, what is what is the one thing you're sort of watching most closely on all those screens? Well, let's stand back from it. So it's almost two years now since the election when the new government came in, and one of the big commitments that they had was on energy. So it was to have a clean power system by twenty thirty. And I was very fortunate to be asked to lead that by Ed Miliband before the election. So we came in like a bull in a China shop with a sort of plan for what to do that we're to get out really quickly, informed by some work that Niso had had done for us. So it's gone through phases, basically. The initial phase was all about getting the things set up and some very big numbers in that plan, which we're still pursuing. But as it progresses, we increasingly change, I suppose, where the focus goes. So in the early part, it's very much about, you know, ensuring that we had the the the the grid plans in place and that we had good plans in place for connecting large renewable infrastructure and use the contract for difference for that. As we go on, increasingly, that's not gonna be the challenge. We've still got lots to do there, but we wanna sort of curate the system to work better. So the thing we worry most about actually is a set of metrics that include things like constraint costs, which is something I know that you care about. But that is quite a good sort of system metric for whether you've built a system that is what we call operable. So we look at those sorts of things very regularly, along with, at sort of quite granular level, what's happening with the actual projects. We've got a project list essentially that we're trying to see delivered. So it it often involves us looking really closely at individual projects and what's happening with the delivery of those. I love that you look at constraint costs because to me, there's kind of different ways you can design your system. Right? You can you can be sort of more market oriented and put more risk onto market participants and allow market participants to make their own decisions. Or you could go down a more sort of central routes and try and move things faster by central planning or strategic spatial energy plans. And we're sort of on the left hand side of that if people could see what I was doing. We're towards the more sort of central side of that, which means that if we don't get timing right and we build the wrong things in the wrong order, we try and do things very quickly, which is exactly what we are doing, we do run the risk of having the sort of the gremlin pop up in the system. And that gremlin is sort of constraint costs. Yeah. And so I'm really interested to sort of to see that you're thinking about that. Obviously, we we expect constraint cost to increase in the near term. So how do you kind of square off the the pace of Clean Power twenty thirty with the kind of gremlin in the system of the constraint costs? So I quite like the gremlin analogy. I mean, look, you're right. There's a different way to do this, which would involve far less pace. So you could you could take your time with this. You could plan that system, and you would probably build the grid first if you were doing that. So you would you would put the grid where it needs to go, and then you connect to that system the generation that you want. Our view is that that would just take too long. So we are we are definitely engaging in something that is that is more challenging, or I quite often talk about building the plane while it flies because we're doing grid build plus generation build. And you the risk, as you as you rightly say, is that we are connecting to a system that isn't yet ready, projects that that will not be able to supply all the power to the demand wherever it's located. And inevitably, that will result in some constraint cost. Important to say any system should have some constraint costs on it because it's the sign that the system is sort of efficiently built. Like, what you don't wanna get to the point is where you don't wanna point where there's the constraint costs get out control. So for us, the biggest thing that matters is that the the grid build program, particularly transmission build, comes in on schedule and preferably ahead of schedule if we can do that because that's where most of the constraints will be relieved. But in addition to that, there's a set of things that we hope we can do alongside that, and we published very recently a delivery plan, as we call it, for what's called reformed national pricing that has within it some clues as to how we might also, alongside that, get that system that exists already to work better for us. Yeah. What we don't want to do, and I freely admit we are doing this now, is connect wind farms that can't supply a hundred percent of the power when the wind blows. It's particularly a challenge in the north because we haven't got the ability to transfer that power to where it's needed in the south. Inevitably, that's going to happen until we can upgrade the system, and we've acknowledged that and we accept it, but what I don't wanna find is a situation where those constraint costs get to the point where they are, you know, spiraling to the point where it really is a challenge for the system. And I don't think that will happen, but it's the reason why we care so much about it. Yeah. We have, I think in those constraint cost forecasts of potentially getting to sort of seven or eight billion per year before the end of twenty thirty, when you sort of work that back in terms of household costs, that could be quite quite large. I think it it will be difficult for people who receive a bill and see, you know, a hundred pounds on from constraint costs. Just just doesn't feel like the type of thing that many people will be able to get their head around. Know, why why can't that energy just float to the right place? Yeah. And, look, the seven billion number, which is the one that is banded around, is I mean, it's top end. Right? I mean, I don't think it will be seven billion, but equally, it's not gonna be possible to keep it to to zero either. So so somewhere in that range is where we want to be, and you wanna be at the lower end of that range if you can at all possibly achieve that. So there's a set of things that we think we can do, some of which Modo has looked at too. So location of batteries, using that cleverly across some of those constraints, that's interesting. Using something called dynamic line rating, which is a technical term, but it's quite an easy thing to conceive of, essentially allowing at the right time more power to flow across power lines than would otherwise happen. And and those sorts of things we think can really help. The other thing that will matter actually is location of those wind farms that you talked about. And some of that, we don't we don't pretend to mandate all of that, but we you know, some of that will will will will change as the next contracts for difference come along and the next allocation rounds happen and the next auction rounds happen, and we wanna keep a live view of some of that. And the last thing that matters is when some of those new projects are built Yeah. We tend to think of them as single blocks on a map, but that's not actually how it works. You get generation from some wind farms ahead of the whole wind farm being constructed. Some of these big transmission upgrades, parts of those will be available earlier than, you know, other parts of that upgrade. And that means I think as we go along, I don't expect us to get anywhere close to that seven billion, but I acknowledge that that's the The number that's the sort of that's the range within which could I mean, you could you could find a number that was high. So so we're starting to move into reform national pricing and let's let's go into it in a second. But just but just first, let's let's make sure we sort of close off the the network side. So it is worth talking about. We have EGL one through four, the Eastern Greenlink, which are HVDC lines running from Scotland down to England. We have four of them coming through. They're about two gigs each. Yeah. And so that will help the constraint. So it's very important in these debates to not sort of just be seen to be, okay. We're just all we're doing is highlighting that constraint costs are gonna get high. Like, there is work going on to to to relieve this alongside the things in reform national pricing. I think maybe where I want to get to is that with CP thirty Clean Power twenty thirty and the sort of big build out of generation tech, we also have this big build out of network that we're trying to do at the same time. Probably the biggest build out of network for some time Yeah. In Great Britain. How how are you trying to manage that build out of network to make sure that we can actually deliver it? Because it's a huge undertaking. It's a massive undertaking and I think you I mean, like, the way you framed it correct. That the it is probably the biggest build of transmission that we've seen since the sixties, you know, in terms of the overall ambition of it. And I think more importantly, in terms of its impact, it's again, I use this term sometimes when I talk publicly, but it's what we're essentially doing is turning the grid inside out. You know, we're moving from the old grid that was planned around coal Yeah. In a really sensible way by an organisation called the CEGB, which is essentially, you know, the forerunner of NISL, you can think of as the energy system planner, and that was done in a really sensible way. They looked at where people lived. They looked at where the coal seams were, and they put power stations in sensible locations and then tried to minimize the amount of grid that was built to take the power from where it was being generated to where it was being used. We we need to do the same thing. So we benefit from the fact that there'd actually been quite a lot of planning over the last few years about what that strategic new system needs to look like, And a lot of the planning was done ahead of what we call the price control period, which is basically the period over which the transmission operators get to bid to construct something and then have the offer of the regulator agree that and then recover those costs over time as they're built. So we we are in the point that we're actually we can go fast on that grid build. And you've mentioned some of the big projects. The ones that really we think a lot about are they're mostly in East Anglia. They're the they're the the ones that that that bring the power onshore. So there's a big project called SeaLink and then a huge project, I think probably the biggest single project we've ever built called Norwich to Tilbury. And these are very, very important projects that are in the planning system right now in the in the middle of being determined, as we call them. But when we have those projects up and running, they will relieve most of the constraints that we see across Britain today, and therefore, we care a lot about getting them in on time. Now those two projects are running to twenty thirty one timetable at the moment. If we can bring them in an extra year earlier, at least think about that year of twenty thirty, that might relieve four billion of that seven billion pound constraint number that you talked about. So these they have an outsized role in delivering the efficient, cheap system that we want for consumers, and therefore, the government, not just me, has an interest in supporting those projects to be built as quickly as possible. And that means partly managing the planning process as efficiently and and as well as we can So that we get to a determination in good time. But it particularly means getting the construction of those projects done ahead of schedule if we can, and that means a really deep discussion, you know, for example, yesterday with National Grid about the ways in which we can do that. So I think that's quite exciting. It sort of brings a focus to the work that government does with industry that we probably wouldn't have had in the past. You know, that's the idea of this being a mission. It's not just a government mission, it's it's something that's shared by National Grid and the energy sector, and they get it. Right? They understand the importance of getting these projects in on time. And that is that is a good example of what's actually happening in mission control. You know, we're not sitting looking at schedules of work with National Grid, although we're close to it. But what we are doing is asking daily what can we do in government to try and remove the barriers this thing being built because it is so important nationally for this country. I think it might surprise people to know that just the the the pace of actually building out those new transmission lines, eight to ten years is not uncommon. Yeah. So when you say, oh, look, I'd like to get this done, then let's say a political cycle is five years or roughly, then if you have the idea in the first political cycle, like, the the ideas that you bring through might not land in that first political cycle. They might be in a second or a third or whatever it might be. So that's really this is a really important point, though, because if you think about the the Clean Power twenty thirty thing, where people there's been a lot of focus on the twenty you know, why twenty thirty? The reason for it is because you can you can envisage this work being done in a single parliament. You know, the the the the net I don't know when the next election will be. It'll be before twenty thirty, but the majority of the work that we will do to curate and create the clean power system they want by twenty thirty will be done in this parliament. And, you know, I feel really proud of what we've done in those first two years because that that momentum is there now, and the irony of that is the benefits will come in the next parliament more so than this one. What we're trying to do now is to bring forward some of those benefits so that people see that as early as possible, and those benefits are to the energy system itself, of course. I want the benefits to go to consumers, of course. There's a host of other benefits, and if Ed Miliband were here, he would talk about the industrial and employment benefits that come with that. They're enormous. These are huge capital projects, not just the grid projects, also the renewables projects, the storage projects up and down the country. That is employing people in parts of the country that wouldn't have those jobs otherwise, and the sums involved are huge. So, you know, these are this is an investment program like no other. You know, it dwarfs anything that you would find in a traditional government spending review, for example. So it's a bit like harnessing, you know, a market that can deliver all this, but trying to sort of sort of grab the reins early on it so that you get these benefits as quickly as possible. Yeah. And then and in terms of thinking about as we build out that network capacity, so one thing that sort of seems like it would be interesting is is obviously with you mentioned the allocation rounds and contracts are difference to get allocated to wind and we build out more wind in different places. So we're now working really hard to try and sort of fight the constraint cost that might come up and make sure the network is there in the future. To get a system because like life goes on beyond twenty thirty. It does. I mean, may not be there for it, but it does. Yes. Like I understand that that happens. Understand the concept. And as we add more wind to the system, like how how do we how do we put the sort of the system controls in place that encourage us to not fall into these sort of traps again? And I'm thinking about things like, you know, could we do more to encourage networks to be measured on utilization of their network Yeah. And try and be a little bit more sort of forward thinking about this. Well, look, look, I agree with that. So the the there is a inevitably, we're in a situation at the moment where we don't have the network we need and that, you know, we also don't think we have the generation that we need. So we have inevitably had to take a take a take it on the chin that we're gonna build this stuff now. What I don't wanna be is in a future situation where we're do that again. So you don't wanna do this every single parliament because there's extraordinary amount of effort that's gone into this from government and from industry to try and get to where we need to by twenty thirty. There's a reason why I think this and stepping back from the sort of detailed, you know, what's in the clean power plan and what we're trying to do across the country. If you look at what the energy system needs to do over the next twenty years or thirty years perhaps, the challenges that I hope, as someone who's worked on climate change for most of his career, that what we're gonna see across the country is mass electrification of Yeah. What is presently fossil fuel led industries and sectors. That is going to result in a larger demand for electricity. And I want to be in the position by two thousand and thirty when we're ready for that growth and demands that I hope is going to come. Yeah. And, you know, if you look at my old organization, the climate change committee does the projections for this out to twenty thirty, they would say that we need to double power demands by twenty fifty Yeah. If you wanna hit the carbon targets that we set for the country. That also, you know, that electrification story also brings with a huge efficiency story for the whole economy because we're not wasting energy from fossil fuels through burning them and wasting all the heat. So there's a not there's a productivity benefit that comes with that too. It's not just a climate benefit. The reason for having this clean power target by twenty thirty or mission for twenty thirty is that we wanna be in the right state at the start of the next decade so that we don't encounter the problems that we have at the moment. And the biggest dysfunction that we face at the moment is that we are building generation in parts of country ahead of network. That's the you know, we are procuring through a really strong, good system, the contract for difference that was developed in previous government. But we're putting those projects in places before the network is being built, and that dysfunction is is where a lot of these issues of constraint costs that we talked about is coming from. I don't wanna be in that position in the future. So that points to us having, through a different process that we haven't talked about yet, that we call the strategic spatial energy plan A much better sense of what infrastructure we want to have in our energy system in different parts of the country. It's a spatial plan. And with that, the most important thing for me is that we have at the end of that process a really strong idea of what the future network will look like because that will that will allow us to get into a future where we are not suffering the kind of problems that you asked me about. One final question on networks before before I move on. And and so so you've described it really well. We've gone from coal and we're going into electrification and we're going to this world where there'd be far more demand and that demand may be far more flexible. We'll have EVs at home, electric vehicles at home, we'll have solar panels on roofs, we'll have heat pumps that you could you could flex. And so this whole system moves from large centralized transmission systems to something where there's a lot more flexibility in the system and there's a way in which just the whole system will work in a in a different way. So some of the sort of more traditional ways of thinking about strategic planning perhaps might not be the right answer. Perhaps like we might see other systems or other grids do a better job of handling kind of the new assets and new opportunities that come forward. Do do you worry about that at all? And and and do you think that the the network should perhaps look to rather than just have sort of grand plans around expansion, also think about, hey, how do we run this network hotter? Yeah. So that's exactly how I think about it. So I think it is necessary to do a strategic plan, I think it's important that you do it, and if you think about the plan that we did for twenty thirty, that was a of blueprint for what we're now doing with the strategic plan. And just briefly for anyone tuning into this, the strategic plan is, I think, the biggest and most important thing that will happen in the next twelve months. So, you know, this is a a pretty simple process to to explain. You ask our energy system operator, NISO, which is a newly independent organization, to give advice to the government about what options there are for the future energy system. We then, in government, make a decision about that. That goes back then to the energy system operator to do a more detailed design, and out of that comes a whole host of things, including a strategic network plan that we can have for the country. It's really important to do that now. What you want, I think, at the end of this is something where we're not having to do that every ten years. We actually want, know, build the strategic network that we need for the future, and then we get into the exciting, sexy stuff you've just talked about about making that network work for us. Yeah. So, you know, that is where the that, frankly, is the exciting thing, that you get to a world where we've established the motorways and it's the it's the the the sort of trunk networks there, and then you you attach to that a much more flexible dynamic system where the cost savings come directly to the consumer. You've got stuff happening at the other end of the wire. That's where the really important stuff is going to be. And that, to me, is the excitement of all this, that we're sort of setting that up. And that flexible, that word that we use a lot, a flexible power system is, I think, the future of every economy. We haven't got yet the kind of trunk network that I talked about in place to allow that to happen. So so, you know, inevitably, in this parliament, as we focus on twenty thirty, we've had to think about the big stuff. That means transmission. That means the really big, you know, nuclear decisions Yep. Decisions on big, big wind farms offshore. We will get to a future where actually the exciting stuff in energy policy isn't that anymore. And, frankly, I think that can happen quickly As long as we're confident about what that future looks like. We get into a much more interesting mode where, actually, a lot of this is driven by the fact that the bundles of tech that will drive this Yeah. Are at the other end of the scale. They're in households and businesses, they are being used flexibly, they're receiving the signal to to to to operate flexibly. Yeah. That that is the future power system that I've talked about for fifteen years, and and you're doing this stuff. And we've and we have not talked about reform national pricing yet. Today is the twenty second of April. The government doc came out on the twenty first of April. So I had a had a good read last night of Good. The potential system that we might be entering into. Now, I think there's kind of two things I'd really like to talk about. One is that thing you were just mentioning, which is how in a like a reform national price system, how do you give these kind of signals to people to do the right things? So that's sort of first question. Yeah. I'll like, let's do that one first. And and the the second question I'll come on to is a big part of reform national pricing or the the proposal is around delinking Yeah. The price between power and gas. Let's come on to that second. But let's let's start off with how does the system how does the new pricing system give the right incentive to the right part of the network to get the most out of it? So I'm glad that we gave you some bedtime reading. So as we're talking today, it's the day after a big set of announcements that the government made, and it's worth just delving into some of the context for that. So amongst the many, many things that we announced yesterday was this delivery plan for reformed national pricing, but actually the context for that is the the crisis that's going on around us. It's worth just touching on that because all of these issues are now framed by what's happening in the Middle East. And once again, we are in a situation where this country, despite not having any direct intervention in the Middle East to cause the situation there, is facing the full effects of another price crisis. And the reason for that, sorry to go back to the fundamentals, is because we are so dependent on fossil fuels, and we are exposed to all the geopolitics of that. And we've this is the second crisis we've had in two years. So what we've done, an important framing point for all of the questions you just asked me, is, you know, we have leaned into this clean power story, this clean energy story, because that is the route through which we think we can secure ourselves from these situations as they come along in the future, and they will come along in the future. I did this a while back. We looked at these price crises that that that fueled by geopolitical events. There's roughly one every seven years, and we're slightly ahead of schedule here by having one within five years. You know, within twenty twenty two was the last one. Yeah. Every time this happens, the country, the economy faces a crisis that's linked to it. And, you know, the only way we'll get off that is by having the kind of power system that we've talked about already today. So we're trying to accelerate that as much as possible. We'll come to delinking. That's part of the story of what we're trying to do at the moment. But the main part of it is that we are trying with Clean Power by twenty third to accelerate to that future quicker than we would have done otherwise. To make that work, you gotta have a sense of how that system will operate. So the the really important set of things that we announced yesterday amongst them is this delivery plan for reformed national pricing. In the first two years of government, the big decision was framed by our decision not to go with zonal pricing, something I know, Ed, you've talked a lot about in the past. The main reason we didn't go with zonal is because of the impact that might have on investment, the the the kind of chilling effect that comes from uncertainty from investors. A lot of controversy about that. I think we made the right decision on it. But in that world, you've gone with the world where there is a single price across the whole of the British the British wholesale market. That doesn't work in terms of the kind of the much more exciting story that you asked me about in the in the previous question. You know, there's this this future where there is things happening across the country that are determined largely by weather Yeah. And patterns of demand. A single price is difficult to manage across that. So what we got in the reformed national pricing package, which I encourage anyone who's interested in this to read, is our attempt to illustrate how we will set out a a different model of operation for that strategic plan that I talked about earlier. And we're not done at this. This is gonna we'll keep returning to this, but largely what we've set out in the document that was published yesterday is about citing investment. And the the kind of the main meat of the document and proposals within it are about the signals that we send about where we put things, and there's choices there. And not to get too into the weeds on this, but essentially, you've got a you've got a kind of you have a spectrum of choices where at one end, you allow the market alone to decide where everything goes, which is very difficult in the kind of world that we're in at the moment to to conceive of. And at the other end, you've got an entirely planned system, which is essentially being operated by a control room somewhere and being planned by somewhere in Whitehall. That that is also very difficult to conceive of. So somewhere in the middle is, I think, where we'll end up with this. And we've got a set of choices about how we give the signal to investors about where they put certain assets across that system. At the moment, the main sort of system signal that we send is the things like transmission charging. So naturally, we want to have set signals in place in that system about about locating assets so that you get a price signal Yep. That allows, if possible, those assets to be built as close to where the demand centers are. That causes you, I'm afraid, to have lots of difficulties. If you know you've a lot of wind resource in Scotland, but all the demands in the south, the transmission charging methodology we have at the moment makes that quite difficult. So we're looking at options to to change that. Some of those options involve actually stepping back entirely from having transmission charges that are locational like that. But what we've actually talked about in this document is having a kind of combination of some price signal, so, you know, some price reflectivity as we call it, plus a bit more of a proactive step to connect projects where they need to be, which is a bit like what we've done with the connections process that we have at the moment, which we've gone into reform for twenty thirty. So we're being more proactive about connecting the projects that are strategically aligned with what we think the country needs, putting them to the front of the queue to be connected to the grid. So some combination of those things is what we're exploring in that, and that's about citing assets. Alongside that, we've also given a set of and I'm afraid these are technical stuff technical things, but a set of indications where we will need to go with things like the balancing market that sits alongside how the wholesale market works. And it's within that that you'll get this locational signal that would have been there had we gone down the route of zonal. So Yeah. In that world, we're looking at NISO, the energy system operator, having more access to granular data about the location of certain assets and being able to operate the the wholesale market such that it balances through the operation of these assets wherever they are in a more granular way than we can at present. And that I think is, to me at least, a sort of a good place to end up. It's not full fat zonal, but neither is it full fat state planning. You've got some you've a space in the middle for assets to operate as they should depending on, you know, the conditions in each part of the country. It's really hard, this stuff, but, you know, I think inevitably that's that that, you know, that that sort of middle ground is is the right way to go. Yeah. Super interesting. Let's and I'm I'm always nervous that when you sort of reopen a zonal type debate, you can go for forever on that. I I think that the thing that maybe to to leave that section is the the thing that as a consumer I would love to see is I'd love to see people getting good signals to do things that would help the network. So if I'm in Scotland, could I charge my EV at the right time Yeah. To encourage us to get the motion to wind, you know. That that to me just seems like such an obvious thing and we'd we'd love to see that coming through. But I don't wanna reopen that too much. And then onto the part two, which I've almost forgotten about, which is delinking the gas and power prices. So how does the document that you that you released, how does that do this? So if you're in this space and if you're watching this, I suppose you are in this space, you the the the the topic du jour for some time has been that we have this issue that electricity prices have have are are are influenced in a sort of outsized way by the prevailing gas price. Why does that happen? Well, it's because we have a system we call marginal pricing. So at all at all points, breakdowns of every second of the day, we need to balance supply and demand in the power system. That's just how the power system works. It's a modern miracle that power systems across the world are able to do that. The way in which they do that, massively simplifying it, is essentially that you've gotta make sure that you can balance the amount of that's available in the supply side with what's being demanded, and that generally means that you're bringing different technologies onto the power system to balance. And we do that through various routes, but often the final technology that is used to to to balance is gas. So gas generation is very useful because it's flexible. And in this country, we have a a a large fleet of gas fired power stations largely because in the nineteen nineties, had something called the Dash for Gas. We had a lot of gas coming out of the North Sea at the time. It made sense for power stations to to switch increasingly from coal to gas. That has given us a a quite a flexible fleet of power stations. The the job of the the the the plan that we set for twenty thirty is to say, look, we acknowledge that that's there. Let's not pretend we're gonna close them, but let's use them in a in a flexible way. So we're bringing on, augmenting that system with lots of variable renewables on top of it. And we want alongside that and set a new storage assets that will increasingly displace those gas assets over time. That will come in the twenty thirties, I think, in the main. But at the moment, gas is the is often the technology that you use to balance the market. That means in the market that we have, not just in the power market, you find this common in many other places, that the price that is received by all the participants in the wholesale market is defined by the price of gas. Have essentially a pays clear market. And that means when gas prices are high, everyone in that market is receiving a higher price than they would otherwise. So we've we've been looking at trying to delink the two the the electricity price from the gas price. Now lots to say on this. The first thing is it's happening already. Right? We are we are achieving delinking by displacing gas, by bringing onto that system lots of things that require us not to use the gas in the first place. And that in the end is the future. Right? And that's exciting to see that happen. Just a few stats on that. Early early twenty twenties, probably ninety percent plus of the time it was gas that was set at the price. This year's maybe sixty percent. So, like, we're on the journey. By twenty thirty, if we do no more than see what we've got coming onto the system, it's probably gonna be less than fifty percent of the time that gas is setting the price. So that means the delinking is happening because of the clean power transition that's underway. We wanna sort of bring that forward even quicker, and it's particularly important in the crisis that we're in right now because gas prices are high. So what we've done in the announcement yesterday is something it's quite simple. We were looking at the about about a third of power generation today is not under a long term contract that we call a contract for difference. It's a low carbon generation that is not under one of those contract for difference contracts that we regard as good value for the consumer. Many of those projects are what we call RO projects. That means they're under the an old system called the renewables obligation, which means that they get the prevailing wholesale price plus a subsidy on top of that. Yeah. And that's that's driving a lot of the kind of costs that consumers are bearing at the moment. Now we've had various attempts to look at this, including notably last budget, the chancellor decided that that she would take seventy five percent of the cost of those RO projects off the bill and put them on the exchequer. That's tremendous because that helps the consumer, but we also wanna attack that kind of thirty percent even harder. So what we announced yesterday was something called a wholesale CFD. So it takes a bit of explanation, but not too much. The contract for distance system that we have at Movement for Renewables is the basis of it. So at the moment for renewables project, you bid into an auction, you get a price, and then that's the fixed price you receive. So regardless of what the prevailing price in the wholesale market is You'll get the price you arrived at in the auction in the contract for difference. We wanna apply that principle to that thirty percent of generation that's not under a CFD. Now there's different ways to do that. The one we've arrived at is essentially to say, why don't we try and offer guaranteed wholesale price? So that is the wholesale CFD. So in twenty twenty seven, we'll run an allocation for this. So we're in the now having announced that we're in the point of making that happen. Basically, we'll be offering to that thirty percent or so of the market that's not under a CFD the option voluntarily of receiving a a wholesale CFD, which basically will give us fixed price rather than the variable price that we're seeing in the market now. So we think that'll do a lot of the work, and it's important, but it's voluntary. So the second part of the announcement yesterday is for those projects that are receiving very, very lucrative returns right now because the gas price is high, we see that as a windfall gain. So we have a we have a have a tax that we call the the electricity generators levy that we've increased to try and recover those windfall gains. And essentially, what we're saying to you is you've got a choice if you're in that thirty percent of the market that presently isn't under a CFD. You either pay that tax, we recover it and pass that back to the people of this country in some in some sort of benefit, or you move on to the wholesale CFD, and we'll do that allocation next year. So it's it is a voluntary a voluntary thing, but we wanna encourage as many of those projects as possible to get onto that wholesale CFD. And in a sense, what we're doing is borrowing from a future where we can see wholesale prices will fall because there's lots of low carbon generation in the system rather than commodity price generation. We wanna bring forward the benefit that would come in the twenty thirties to now. So in a sense, that thirty percent of generation, get them on the wholesale CFD now. Yes. That's the sort of system you would see in the twenty thirties anyway. We're trying to accelerate and bring that today to today so the consumer gets the benefit. Yeah. So there's a there's a few parts to that. So for someone who's just heard of a CFD for the first time, essentially, yes, you'll still see that high wholesale price or you'll still see that low wholesale price coming through in the system. But if the if the wholesale price is high, then the generator will give back some of that money effectively to get back down to the strike price and if the wholesale price is low, then they will be topped up to that strike price. Yeah. That's And so that's really how that works for people listening if that's your first time hearing about a CFD. But also just to talk about that general trend of wholesale pricing. So when we do this forecasting, we see wholesale pricing coming down as we go into the future. And so it feels to me like if you're on an RO, then the net amount of money that would go to that generator would be higher in the short term and lower in the long term. And this if you move them onto a CFD, you sort of you kind of re tilt that a little bit so that they get less money near term, potentially more money long term. And so it feels like we're almost it's not the technical term isn't right, but it's almost like we're borrowing from future lower wholesale prices to give lower costs in the near I like though that this description of it. The way I would describe it is we're of we're smoothing out that that cost. So and, you know, the future is going to have lots of generation under long term contracts and also lots of network costs with long term cost recovery as well. That is a very different system from one that we had, say, ten years ago where the consumer essentially was paying for commodity costs. So it was the gas the cost of the gas being burned in a power station or the cost of coal being burned in a power system. There is no commodity cost to wind. There is no commodity cost to solar. So what we're what the consumer is paying for now is the capital cost of building the wind farm or the solar array, and that what we want with the contact for difference is essentially we have spreading those costs out over Twenty years. And in a sense, what we're doing with the announcement with the the delinking announcement is saying is saying exactly what you've described. We're saying to those projects that are essentially getting windfall returns right now, move on to these long term contracts. Let's smooth that cost out and give the benefit give the benefit to the consumer now rather than in the future. And that, you know, that, to me, is a very sensible foot way of looking at it. That that is a we're accelerating towards a future that is more positive for the consumer by doing it, but it is voluntary. So it's big question about how this is gonna work. I mean, the industry is gonna have to process that and work out what they do. So we've done networks. We've done generation. The people will know this podcast, we often talk about batteries and so flexibility is such a key thing for us. In terms of the plans that we have for the system, it feels like we thought about networks a lot, we thought about generation a lot. But sometimes it feels like flexibility is almost like the the forgotten third child as apologies if you're a third child, anyone listening. I'm a third child so I can I can say that? I'm a first. Yeah. You're first. We go. But it but it almost feels like it's kinda like the last the the last part of this puzzle, right, making the most out of that generation, making the most out of the network we've got. It doesn't feel like that falls into some of the big grand plans and particularly when we run more generation through things like contracts for difference where those generators don't necessarily care about what their price is because like whatever happens, they get the strike price and I'm I'm not going into the negative price piece because that will take us slightly longer. That's this podcast too. Yeah. That's podcast too. But but how do you think about flexibility and are we doing enough to encourage the flexibility that we need on this system? So, like, stand back from this. In terms of the twenty thirty plan, it was always the plan that we would go hard at the big infrastructure challenge early because you run out a road otherwise to do that. Like, we we we will not be able over the course of a parliament to achieve what we own by twenty thirty if we're still thinking that being the priority by the end of this parliament. We are at with the next allocation round, which is called a r eight, which we've brought forward to the summer. Yep. That's the last one that will really matter in terms of twenty thirty. We will continue to do them after that, but in terms of the mix of big infrastructure projects that will be brought on by that, this is the one that that that really matters, particularly for offshore wind. So if you wanna get something delivered by twenty thirty, this is the the last stack allocation around that matters. Inevitably, that means that we're gonna shift our focus in terms of the twenty thirty framing and the clean power mission towards I suppose you could think of it as the other end of the wire. I mean, that's slightly oversimplifying it, but flexibility, which I have to say, unless you know, I'm sure people tuning into this know what it means, but people out there don't know what that means. And it's a term that I don't really like, if I'm honest with you, because it doesn't really mean much to your average consumer or punter. But when we're talking about the energy system, we want a flexible energy system because it's going to be a more variable power system. We have got more weather dependent generation on that system than was ever planned in the nineteen sixties. And to make that work, you've gotta have a system that can flex when the power is available. So that has a number of elements to it. We've talked about storage, and and batteries is part of that. We will need a lot of storage on that system, and you gotta give the right signals for that storage to work well. So the the proposals that we put out yesterday for reform national pricing are partly about trying to make that work. We've also given quite strong support for long duration storage particularly because that is a system that, you know, we we haven't built any pumped hydro for a very long time in this country, and we should build more. So we've got a system out there to try and support that. And then at the other end of scale, you've got batteries, which are in what we call the merchant market mostly. And they are they are trying to thrive in a world where you've got that variability. Actually, they want that variability. So I I freely admit that flexibility is the kinda next stage for this for us, and, you know, I've got good ideas. I suspect you've got great ideas of what we could do with it, but to me, the exciting thing is that there's there's still quite a lot that is unexplored about how you build that flexible power system. And then the final bit of flexibility is not sort of big system designs, not location of assets, it's about what the consumer does. That's where the really exciting stuff comes because what we want is to give people the opportunity to save money by having technology. Let's just think of households. It's not the only challenge. Let's think of a household. We I want to see households that have batteries in them, preferably have solar panels on the roof, eventually have heat pumps. That gives you something you do not have in a fossil fuel system, which is the ability to store when it's cheap to do so. Store when there's a power available, use power when it's available from the grid when it's cheap, put power into the grid when the sun is shining. All those things that you could never do if you had a gas boiler or if you were in a fossil fuel system. Your your transport will be electric. Your heating and cooling will be electric. These things require a more flexible power system to work. And, you know, I think we are right at the beginning actually of making that system work and creating that system. We have supporting me as what we call clean power commissioners. And one of them is Kathy McCleay, who is a real expert in flexibility. She is just a, like, a font of ideas of what you can do to make the system work. But priority one is to get those bundles of tech in the hands of people so that they can have the opportunity to benefit from it. So a lot of what we announced in the last day is about that. We're trying to accelerate a world where those who most need access to those savings get the tech first. At the you know, in the past, what we've had is those who are most able to afford that tech get the benefits before everyone else. We wanna flip that on its head so that it's low income households that get solar panels and the batteries first. And and I I fully agree in in the sort of domestic flexibility side and if it goes sort of towards the grid scale piece, I think the thing that maybe worries me a little bit is if if we go through this process where we have contracts for difference, which kind of water down the wholesale price and then we have the capacity market and maybe we sort of move our gas thermal units onto different types of contracts where they're more being paid for their capacity than they're actually being paid for sort of the particular half hour that they that that that they run. We sort of water down the wholesale market. And to to me, it sometimes feels like the wholesale market's going through death by a thousand cuts. And then when when people come on, Julian Leslie came on from S and P and I asked him what his contrarian view was and he said the markets were, you know, essential for the for the good functioning of a of a system. And yet, it's kind of that's from this the the central planning and side of things. And I I worry that we have and that and that by the way is not just Julian, it's been multiple times that's come up that markets are so important for how this runs and particularly, I see a lot of battery business cases. Markets are so important for that. I worry that the sort of the more interventions you make, the the weaker that signal might be. Yeah. And so how do you how do you kind of keep investor confidence in people who are at the forefront of this trying to build out new tech, new batteries, but the the same time we're seeing this kind of reduction of importance in of from from the wholesale market? Look, I don't have easy answer to that question because I think you're right to frame it in the way that you did. I mean, like, there's there's a sort of mythology to liberalize energy markets, you know, the the the and in the nineteen eighties, the UK went further than any other country in the world to liberalize this energy market. But even from day one of that, this this you know, there's an element of state intervention that's still required to make a liberalized energy market work. I suppose we are exploring that that spectrum right now. You know, the the inevitably, to do something quick by twenty thirty, we've had to step in and do a lot more of state intervention, direction to the private sector to build things in the right places, get things built that previously we probably wouldn't have been building. That that is the plan. Right? There's no question that that is what Clean Power is about. We're trying to do something more quickly than what otherwise be delivered, I think, by the market. Okay. But I don't wanna lose the fact that markets work. And, like, I'm a big advocate for for markets working. It's just that you gotta put those controls in the right place. I suppose when it comes to what we call arbitrage, that the ability that's where markets work really well. So if you can if you can get to a world where you have market participants putting their assets in places to benefit from the fact that when the wind blows hard, they can store that energy and they can sell it back to the market when it's needed at a good price. That is how you should be wanna kind of harness the market. And we are definitely exploring the boundaries of that. We still have assets that are working on a merchant basis on the system, but you are right to see that increasingly around those assets, we've got essentially state backed contracts for almost everything. So I don't wanna lose that. You see that most obviously in in in the battery market. It's easily the storage technologies that we're asking to operate in that merchant way. I sort of like it. The one of the reason I like it is because there's also a technology race happening in those in those places, particularly for long duration. As we get as you build out the system, you want longer and longer duration energy storage. The longest duration energy storage we have at the moment is fossil fuels. You know, if we had a lump of coal, you put it on the table and it would sit there for millennia and hold that energy. We are trying to replace that. So we need increasingly assets that have longer and longer energy duration For their storage capacity. At the moment, that means pumped hydro. But in the future, that's gonna mean a set of new technologies. And, essentially, what I wanna try and preserve is a bit of a technology race to make sure that we get to the right place at the end of that. So we've got all sorts of exciting things happening right now. It might be that lithium ion is the answer to everything. But you also have things like vanadium flow batteries and, you know, liquid air stories and lots of things happening right now. And, essentially, we're trying to set up a competition to make that happen because that is often the way that innovation happens best. So I think we toy with this at our peril, really. I mean, we think carefully about everything when we when we intervene on this, but I wouldn't want to get to the situation where absolutely everything is sort of mandated by government By technology. It's a it's a it's it's not gonna be an efficient way to go about things. It's also not gonna be a very exciting place to to do energy investment. If you mandate everything by government, then you kind of really would question what the role is of private companies in this Exactly. At that point. So yeah. It's a very interesting avenue to go down. I think we also see some of the same challenges of replacing coal in South Australia. We now see batteries coming through sort of eleven and a half hours in duration, which is really interesting because if I'd asked you this question ten years ago, said, oh, the longest battery that you could get would be say one hour, and now we see eleven and a half hours coming through commercially. So totally. Right? And and and it's quite interesting that we defined long duration as eight hours. Yeah. And to be honest, you know, you could go much longer than that. You know? In the end, we're gonna need seasonal storage or even, you know, you know, year decades long storage potentially, but we're not quite at that stage with battery technology. But you are right. Like, it's it's you can actually it's almost daily you see the progress of this technology that allows you to have these longer duration. The battery chemistry is what supports that, plus the willingness of developers to put those kind of projects in place. That's the exciting thing. You know, I wanna see that happen. And I would flag from a power perspective, we're now seeing the battery, so the electrochemical side being bigger than the pumped hydro side from a power perspective. And so when you talked earlier about things like gas being kicked off the system, it's often things like battery storage that is doing that Yeah. Which is is fun. Well, and that's you know, as somebody cares about decarbonization, because, you know, most of my career has been thinking about the energy system from that perspective. I I I'm as pleased as I am to have the gas fleet that we have in this country at the moment because that's what's allowing us to accommodate renewables at the scale that we're now building. Yeah. The long future for this is that we need to get those gas assets off as well, and that requires you to have something that is similarly flexible but low carbon and similarly dependable, and that's the bit that people often forget. So, you you know, you've gotta be very confident when you close a gas fired power station that there will be something there Yes. Ready to go. And and it's one of my favorite terms, which I bet has come up in a podcast you've done in the past, but when you have a Dunkelfloater Oh, we've been there. We should do another one just on Dunkelfloater. We actually have mugs that say Dunkelfloater in the office. I should say a Dunkelfloater is a low wind, low solar period. Word. Yeah. Yeah. When when it's sort of cold conditions, so it's really quite hard for a system which is decarbonizing to deal with a Dunkelfloater. Yeah. So the so in a world where you're building a system that is dependent on wind, not exclusively, but largely, we need to worry about these periods of doldrums essentially, where the wind isn't blowing, and particularly in the winter, you've got high energy demand. Yeah. You need to know that you've got assets that can can accommodate that. And the moment, that's what gas is able to give you. You know, that sort of dependability. That's why I think we will have gas in our system for a long time. Yep. We just won't be using it very much. But increasingly, to displace that gas, what you need is a set of newer technologies that offer you really long energy storage duration. And that is might be pumped hydro. It's essentially pumping water up a hill from a reservoir to another one and allowing it to fall again when you need it. But actually, the exciting stuff is moving into a newer set of technologies that that might offer you those long duration energy storage periods, and some of that might just be straight up batteries. Right? It's amazing to see that happen. So it's it's it's I think the most exciting thing that's happening in the energy system right now. Okay. Three three final questions. One on that gas fleet. How do you manage that relationship? Right? So you're saying to them, okay, don't don't run all the time. You you used to run all the time. I don't want you to run all the time now. I actually just want you for those dark lulls, the the Dunkelflauters. Please stick around for those. We really need you for those periods. How do you manage that conversation? Because if you're an investor in a gas plant, of course, you know that in time, those gas plants will will have to shut, but there's a decision to be made about when you close and and and sort of how how long you stick around for. Well, Luke, I don't think we're at the point where we know exactly when that's gonna happen. So this is quite a, you know it's not a difficult conversation with the operators of those those those those plants right now because they they understand all the issues that we've just talked about better even than than I do. So gas is around for a while. They also understand that its rule is to run less. And so I think the the first the answer to the straightforward answer to your question is you ask them. Right? You say, can you do this? And they tell us, yes. We can. So we have a system of essentially securing the capacity that's that's so it's available when you need it through what we call a capacity market. And at the moment, that's working very well for us. There is a future though where we're gonna need to look at this properly, and it's the industry that lead that conversation. So we need to think increasingly as that gas fleet as what we call a strategic reserve. Yeah. And the you know, definitely, there will come a point where we're gonna have to look at the arrangements for that. I don't think we're at it yet, but it's it's also potentially quite an exciting thing to think about. So you need to think about it as an asset for the country that's there when you need it. And, basically, we need to keep looking at whether the capacity market arrangements are doing what we need them to. At the moment, I'm very confident they are. They keep showing us that they, you know, they're delivering what we need. But, you know, into the twenty thirties, this is gonna be more of a challenge, think. And people say, oh, look. Are we gonna go around turning off these gas units? And the answer is no. We're gonna have a very pragmatic conversation. No. I think we'll have fewer of them, but we're still gonna need them. And it you know, again, as someone who cares deeply about achieving net zero, I did all the work showing how the country could do that. That is a good use of fossil fuels. Like, that is the, know, that we should be using them only when we absolutely need to because they have that ability to store energy forever, essentially. We should use that when we absolutely Through the difficult parts. Exactly. And, you know, the the point about the clean power target is not to get rid of all that gas. So we didn't it's a quite pragmatic view on it, actually. What we're saying is that we think we can get it down to five percent of the total mix and probably keep it at that level for for quite a while. And it's it's towards actually, I think it's towards the end of the twenty thirties, you really gotta face into some of the harder challenges there about what you do. And by the way, if you get close, that's still massive change. Totally. Right? I mean, look, this is all about aiming high and seeing what you can do. I mean, it's been amazing doing this job for the last few years because we we didn't know whether this would work. Right? So the ambition that we injected into that plan from day one involved us setting out very lofty expectations across every one of those technologies that we've talked about, it's pretty much worked. I mean, the industry's completely responded to it. I don't wanna lose that enthusiasm that we can you can sort of sense. It's particularly amongst the industry. Yeah. It's great having a government that wants to do something like that. Industry loves seeing that ambition and they respond to it, and you get into this kind of really kind of great optimism loop that happens when basically you say, we wanna do this, and then industry says, are you serious? And we say, we're really serious, and then they deliver it, and then you get into the next phase of it. So, like, that's what the Clean Power Plan has achieved. And I think if we keep that on what I sometimes call a rolling boil, that's when the good stuff will happen. But, you know, you're right. Like, some of it's gonna work well. Some of it, I think, will work better than we planned. Some of it, we're not gonna get to the where we where we wanted to, and that inevitably is what we're in a phase now where we understand more of that. I'm I'm very happy with the progress we've made. Okay. Final question. What is one view you've got about energy markets, a contrarian view you've got about energy markets that not many other people would agree with? Oh, gosh. I'm not sure I have an a ready made answer to this. But I'll give you I'll give you one. I think there's an interesting and that sort of harks back to another decision that we made in the last few days. I've said this before, so I don't think I'm in and and I'm gonna be saying anything that would surprise anyone who's listened to me in the past, but I think there is a declining rule for carbon pricing in energy markets. So I think we are in a world now where carbon pricing is already not the principal route to decarbonize our power system. And that is yeah. I mean, it might be seen as contrarian, but you the the the it's it it basically, we will achieve our goals in decarbonization through other means, and that's largely about bringing on providing the right incentives, of course, but bringing on the the cleaner stuff rather than giving in the signal to the dirty stuff. And the reason I raised that is because in the last few days, something that didn't get as much attention as it probably should have is that the treasury and the chancellor made a a really important decision to take from to take carbon pricing off gas generation. The carbon price support? Yeah. So we still have we still have something called the emissions trading scheme, which sets a carbon price, and that's a really important continuing signal. But we in the UK had an additional carbon price on top of that, which was designed essentially to give an even stronger signal than was provided by An EU wide scheme called the ETS. And it's done its job, And it's great to be able to retire it, basically. So we're in a world where that was designed to drive coal off the system, and coal is gone. And what is actually what it has been doing now is actually just making gas slightly more expensive than it needs to be, and that has an important outsized impact across the market where gas sets the price. So it's brilliant to see the chance to take that off. I came into this job as that was kind of one of the things I wanted to see happen, and it's happened now. And it's a clue that carbon pricing is basically coming down the list of things that matters. And it's contrarian, I suppose, because your average economist would say that's the answer to to how we address the climate crisis. I actually think it's far more interesting than that. It's a critical thing in terms of what it enables as well. So lower power costs, more electrification, that's the missing piece of the jigsaw that looking for. What I would say on this, that in the end, what matters most is cheap electricity. So you wanna give that signal rather than trying to squeeze off the dirty stuff with higher prices, you wanna make the clean stuff cheap. So that, know, we're in like, here we are talking today and it's happening and it's exciting to see that happen. So maybe it's not contrarian to say that, but it's definitely my view. I think it's quite cajarion. Chris, thank you for coming on. You've been a wonderful guest. I hope to have you on again soon. Thanks, Ed.