Mission possible: The UK's clean energy future with Emma Pinchbeck (Chief Executive @ Energy UK)

The system is like a jigsaw puzzle, and you can change the size of a piece, but then all the other pieces need to move as well. Maybe you try and build less generation and you really drive on flexibility. Maybe you try and do more energy efficiency to reduce demand. You've got to really have a deep understanding of what you're trying to achieve.

We are in competition now with the US, with China, with with India on solar, you know, with Japan on clean hydrogen, with the EU, with the Green New Deal. It cannot just be that because we've been the first market in the world to do this, we can just kind of expect to get the industry to do stuff like at least cost right now and not be thinking about those wider factors. And I think that is the big question for what the CFD is. I'm really excited to see what we can do, and I think we're pretty optimistic for the UK now. And we'll see whether they can actually turn that into, like, successful delivery.

Hello, and welcome back to Transmission for another installment exploring the challenges faced by the new government. This week's episode is with Emma Pinchbeck, chief executive of Energy UK.

The conversation covers the industry side of Energy UK's Mission Possible Report, why properly leveraging the next few CFD auction rounds is vital for net zero goals, and the necessity of strategic planning and resource allocation of grid expansion. If you're enjoying the podcast, please hit subscribe so you never miss an episode, and leave us a review wherever you listen. Let's jump in.

Hello, Emma. Hello. Welcome to the podcast.

Thank you very much.

We're all quite excited here at Modo to have you in the office. Energy UK is a big part of our whole world. And, yeah, the the work that you guys do is awesome, and really excited to talk to you about it. Before we get started, for those who are listening, Emma, do you want to just say who you are and what Energy UK does?

Yeah. I'm the chief executive of Energy UK, which still makes me feel quite grand when I say it, but it's true. And Energy UK is this incumbent energy trade body for the energy sector.

And by that, I mean, we're not technology specific. We look after the whole market. We've got retailers, generators, battery storage providers, flexibility solution providers, electric vehicle charging providers, heat pump manufacturers, lawyers, accountants, investors, the whole system, all in the membership with the exception of upstream oil and gas production and and the, DNOs, which means we try and take a whole system view of the energy transition.

And then we are mission led, at least as the secretariat, and what we require of the industry and ourselves as we're delivering on net zero, trying to provide affordable and fair energy services to people, and trying to build a better energy industry.

And how many firms do you guys represent?

Got around a hundred and eighty.

That's smaller than some trade bodies, but the difference is we've got the biggest players in the market and at senior level, so usually country manager level, CEO level. And that doesn't necessarily mean massive corporates, but it means the kind of key players in anything interesting in the sector tend to be members of ours, including, you know we we work with Modo. But we've got, for example, you know, Mitsubishi Electric, who are very big heat pump manufacturers.

We've got, SSE, who are very large generators. It's that kind of membership.

Okay. And what were you doing before this?

Before this, I was working for the renewable sector. And then before that, I was the head of the climate change program for WWF.

And before that, I was working in consulting, helping start ups scale into the market. And before that, I was in finance doing some work on renewables projects.

And before we jump into some of the policy directives and the the work that you guys the the mission that you're on, Just an idea about how big the organization is and how that's split up. So how many people are in the in the UK, and how what what do they all do?

I think we've got about forty five, fifty people now. That's big for a trade body. It's a kind of small, medium sized business.

And and what do they all do? So What does the deal do?

That's a good question.

With with trade bodies, you don't know whether, you know, are you clipboards in Westminster chasing chasing MPs, or are you out, you know, bringing, you know, CEOs together in workshops?

What what's what do you got? Or writing reports? Yeah. A bit of all of this.

All of it.

So, yeah, how does it split up?

We've got a very large policy and advocacy team at Energy UK, and that's a deliberate choice because trade bodies do a variety of things. They can bring industry together to network. They can hold conferences and events to allow you to kinda sell up and down the value chain. We do a little bit of that, but not as much as some other trade bodies.

Then trade bodies tend to do things like responding to the media. It's not PR, but it's we're the first voice that's asked about a sec an issue in the sector, so we go onto the radio and defend or promote the sector and talk about it to the public.

You get on the beeb quite a lot.

I do get on the beeb quite a lot.

Who knows why? That's cool. That is cool. And we do we've we've made a a real effort in my time at Energy Care actually to do the media as much as possible because we think there's such a massive change coming with the energy transition that we're part of talking to the public about it as well as our members.

You know, we've got to get out there and talk about these things truthfully, you know, with evidence clearly in a language that the public understands. So we do quite a lot of that. And then the policy and advocacy is the biggest bit of our work, which is we get industry together in working groups and committees and workshops, and we have our own specialist secretariat. And they analyze government policy.

They provide economic insights. They try and work out the best way that we can create the regulated market and the policy frameworks to enable private sector investment and innovation, and we take that to government and to officials as often as they'll let us go and see them. My personal view of this is, like, you can't you can't just shout a message at officials and not have it be true. You've got to really have a deep understanding of what you're trying to achieve.

Try and understand that government is looking for economic and social outcomes that go beyond profit in the market.

Try and meet in the middle with what they're trying to do and what industry wants and evidence base everything you do. So we've got a real team of experts, like first class people that have come from all over the industry, from places like Citizens Advice or from environmental NGOs or, you know, the planning inspector who've got different backgrounds and can try and be that, I suppose, diplomat between government and the industry.

And we're gonna before we jump into the detail, I'm interested to know, what's it like a a group as big as Angie UK with so much change in parliament?

So this has been the last couple of years has been a bit of a rocky ride Yes.

For for British politics and and who's doing what in bit different parts of Westminster. And how how do you how do you how do you navigate that?

Well, I had energy secretaries in the time that I was out over sort of three months when I was properly out and not really looking at my emails. It was spectacular.

The honest answer is I think we've been really pushing to have clear positive messages, particularly on net zero and the energy transition because that's what our international investors are looking for in the UK.

With all of the political turmoil, our markets are actually really stable here. It's a massive UK success story.

And the repeated case I've been making to government for the last two years of my life is that is good. You have that as an insurance policy, but investors also read headlines.

And so regardless of who is the secretary of state, if you could be consistent about messaging that net zero is good, that it's an economic benefit, that you're gonna, you know, continue with stable markets, that would be helpful. We didn't always achieve that.

Mhmm.

I would say one of the things about the general election has been a big shift in the mood music on energy transition and the value of it to the economy, and already, I'm feeling a kind of positivity back from the sector and from our investors.

How do we cope with it otherwise?

As well as people who are real deep energy geeks, we've got people that really understand politics, and we've got relationships with all of the political parties in the UK. And as much as possible, we try and anticipate stuff coming before it happens.

Because there must be sometimes you go you you wake up, you check the BBC Yeah. And you're like, I'm like, no.

That's a frequent I mean, that happened literally this week. Alright.

I've been doing dinners. I've been working on this crazy objective, and now they're out.

It was a bit like that. It has been a wild you know, just personally, it's been a kind of wild two years.

I think we're all quite tired across the sector. What has been nice to see is there's been a bit of a change in move music. This isn't a party political comment. I don't think it's necessarily about the policies even. It's just because the new government has a very large majority, and so it feels a little bit more predictable and stable at least for a year or so.

And It's wicked.

It is just It just makes it helpful for the industry, doesn't it?

It's so it doesn't matter whether you're left or right. Yeah. Just having particularly in our world, there's a I mean, you're obviously nonpartisan.

I, I suppose I'm non nonpartisan, but we've got confidence now.

I like nonpartisan but.

Well, nonpartisan but. Well, I do I'm a I do I'm a bit of a fanboy of Ed Miliband anyway. And then because I I think I think he's great. And then also we've got confidence. We've got we've got confidence back. So we should be able to get a lot of stuff built. It's very exciting.

Yeah. I think that's true. The the mood music matters for the industry. And in the time I've been doing this, which is now a depressingly long time, that is the thing that government has always underestimated, that the message matters sometimes as much as the policy, the kind of vibes for investors who are a flaky bunch. And I think I'm really excited to see what we can do, and I think we're pretty optimistic for the UK now.

And we'll see whether they can actually turn that into, like, successful delivery.

Yeah. Well, it's all about planning reform, isn't it? That we can get more things built.

Oh, yeah.

But, yeah, good good mood I like that that phrase, mood music. Can we have, five on a mission? Five on a mission for Katie.

I love that. By the way, that's not actually the title of the report, but I like to think that they put the press release out in that way because I sound like an Nina Byneton novel. Yeah. Yeah. Yeah. Sorry. By my comms team, Kylie.

Yeah. So let's so what okay.

Should I get it should I rephrase that if it's It's mission possible.

That's what we've called that report.

So if people want to look at it better, you know.

I'll tell that to the comms team.

So what is Mission Possible, or Five on a Mission?

Well, we during the kind of pre election period, there is a limit in how you can engage with officials and political parties, But we were aware that it was quite likely to be a big change election and that energy would feature pretty strongly. And so we developed a list of stuff that we thought was doable by the end of this year or at least, you know, pretty imminently if if there was a change in government. And we took that to all of the main political parties' manifesto writing teams and where we could to some of the officials. And the aim was to give them a list of things that would just mean that they could hit the ground running. And I think particularly as all the polls were predicting a Labour government, Labour have been out of office for fourteen years.

It's usually, like, just, like, three people in a in a back office trying to cover all of energy, and so they really need those kinds of ideas early.

And it's been a really useful way to engage government, and it covered five main areas. It's the power sector, so clean power.

And then, importantly, how does that clean power provide cheap bills for people? So the next section is all about how can you make energy bills cheaper over the next couple of years. How can you provide affordable, fair energy services?

Then, this is a bit geeky, but institution reform, so how can you do delivery really fast across government with all the new bodies and things that are being created?

Then the demand side, the electrification of heat and transport is gonna be huge over the next decade. So how do you do that effectively and efficiently?

And lastly, it's been really overlooked for the last several years, but the relationship between EU and UK energy markets is not is really important, particularly on stuff like carbon pricing. So there was a set of ideas there as well.

Today, we're gonna talk a lot about priority one. I mean, it's my favorite because it's all about the power sector. But, and it's also first. Yes.

But I'm sure they're all equally don't have any favorite. What I really liked about your achieving so you there's a power sector achieving clean power by twenty thirty is if the the statements you made on it is about making decisions. It's like, let's get some let's get some bloody decisions made. Yeah.

Let's not push out so that we've got some big decisions about nuclear, about hydrogen, about what kind of energy mix we want. Let's make let's let's force the issue and make some decisions. And there's also a big focus on the CFD scheme, which we should probably talk about now in detail. And, yeah, big fan of the CFD scheme in general, and it's already a great mechanism to get money moving into infrastructure.

So keen to know how you're thinking about all this. But, yeah, let's make some decisions. Let's think about the energy mix beyond just generation, but also the whole energy system, and then let's use the CFD scheme to its full potential. Yeah.

So let's start with the CFDs.

Let's start with CFDs.

What do you guys think about CFDs?

I am a big fangirl of the CFD. It's possibly from a this is personal. It's probably from a position of bias because I worked in the renewable sector and worked on the CFD scheme, you know, moving over from the renewables obligation, which was the previous support scheme.

I think Which was objectively not as good. Objectively not as good for the following reason.

What has been amazing about the CFD is it is a competitive mechanism, and it just drove prices lower than we thought were possible, faster than we thought were possible. And I remind people all the time that the target for twenty twenty prices for offshore wind from the government government's best estimate of what was possible was a hundred pounds per megawatt hour.

Wow.

Yeah.

And we smashed that in the first auction by, you know, almost half, and it's been So just to so so just so everybody listening, sure most people already know this.

So what we're saying here is, yeah, twenty twenty, it's not that many years ago, four years ago Yeah. Government reckoned they could buy offshore wind at twenty a hundred hundred quid per megawatt hour, and we came in at less than fifty.

It was forty what what are the The it was know this is old knowledge now, but in that the strike prices for last couple of auction runs were, like, I think they were fifty seven pounds fifty at the lowest and up to seventy quid.

K.

They've been, you know, below sixty most recently. And the important thing is they're coming in, like, mostly below the price of building a new gassy CGT.

And for offshore wind in the UK and we'll see what happens now. We're able to build onshore wind again. But offshore wind became the cheapest kind of former generation that we can build at one point. And that is just someone reminded me the other day that, you know, ten, twelve years ago, the renewable sector, when I was working for them, was skeptical about whether or not offshore wind could scale up. Like, we as an industry were skeptical about it. And part of the reason we've managed to achieve it is that partnership with government and the CFD program and the decision to make it competitive and drive the market to innovate.

I I think we can be really cynical in energy. We're always worrying about the kind of next problem, and we forget how far we've come and all the things we've done that people just said absolutely were not possible.

Yeah. So It's it's an industry of exponential curves. Right? Yeah. And humans, we all do.

I'm not immune to this. We all underestimate exponential curves. You look at the cost curves for for battery CapEx now. It's, it's incredible.

We're gonna talk a lot about CFDs now. We should probably explain what a CFD is. So I think you're the fourth person we've had on this podcast who we've given the chance to explain what the CFD is and and in as as few words as possible. It's a bit of a challenge.

How do I think about the CFD?

I'm trying to think about the most efficient way of explaining it. I always think of the CFD as a way of easing investor concerns about the return they're gonna get on a project. And the the way that that happens is the project bids in a price to the auction system, and when the final price comes out, that that is the kind of benchmark.

And if the wholesale market goes below that, the government pays the developer up to the value of that price, so they kind of just reinforce the price that they get. If it's the other way around, the developers end up paying the government. And through the energy crisis, that meant that the treasury was making quite a bit of money from the renewables projects. Hooray.

So it's good for the consumer to avoid.

About enough.

Not talked about enough. No. Everyone always talks about the other way around.

The Internet troubles online, but what about the moon?

Yeah.

It it goes both ways. So over time, you should get this kind of much more even predictable price. And if you know anything about pension funds, what they like is even predictable prices because the folks who are in pension funds are not sophisticated investors, and they have to minimize risk. But that pension fund capital is very cheap, and that's what you need in large infrastructure projects.

So that's what the CFD does. The other clever thing about it is it is an auction system. So what that price is that they're kind of measuring against is determined by what everyone bids in, and you might not get offered the contract. And so you have to bid in as low as you possibly can to try and get a contract for your project, and that kind of makes sure that that price is good value for people.

Alright. We've been doing the CFD for a while. Yeah. So what what's good about well, we talk about what's good about it.

Right? It drives down the cost of these investments, big multibillion pound investments. But what needs reforming about it? You you guys have got a lot of thoughts about this.

What's the policy of what's the objective, and then how do we achieve that through reforming the CFD? And, this is a bigger question than just more money in, and there's there's lots of discussion about round sizes.

And, reading what you guys have put together, there's more to it than that. So how are you thinking about it?

It's really important to say that the Mission Possible work that we've done is about what can you do over the next couple of years. And the reason for that is that we had an eye on a Labour government implementing a twenty thirty clean power target, which they are doing. And so we were working back from, right, what are if that is the target, what are the immediate priorities for the next couple of years? And, really, we think that a twenty thirty clean power target means we've only got this auction round that's happening, like, now, and we'll get the results in the autumn.

Or at the next auction round, it's possible you might get some projects in two years' time that could be online by twenty thirty, but that is quite we're allowed to say it's quite squeaky bum. They're the most Yeah.

The lead You can say whatever you want on this podcast.

We don't report it to anyone.

First use of that. I've been getting a lot of it to your podcast.

It's It's almost a problem.

The lead generation time on an offshore wind project is between four and six years. And so if you do the maths and we've got this auction round and the next auction round, that means our recommendations are all about basically stability to try and get as much stuff as possible built and commissioned in the next two years to be online by twenty thirty.

That's why so much the focus is you need a bigger budget, and you need to make sure that your prices are right. And you might know this, but we had an auction round fail last year and a quite ropey auction before that. And the reason was that the calculations done on what the appropriate price should for those contracts should be were inaccurate, and they were inaccurate because the UK didn't properly estimate the costs in the supply chain creeping up globally. They didn't really understand how much competition there now is for things like cables or the boats to put wind turbines or the commodities going into making wind turbines, and they got the cost estimates wrong.

We've corrected that now, but we should make sure we're on top of it, and we should make sure our modeling is better. And we need to make sure we have budgets big enough to commission I mean, we're gonna get three to five gigawatts, we think, out of this auction, but you're gonna need six to eight minimum out of the next auction. And that still leaves you with an eighteen gigawatt gap between what we will commission and what we think that we need for twenty thirty.

Well, let's start with some of those numbers. It's good. We should we should, dive into what happened last year because it's important.

Yes. So what do we need by twenty thirty? What's let's talk there's some big picture numbers. How many what how many gigawatts of wind, for example, do we need by twenty thirty?

This is I'm not judging the question, but I will tell you what the government has said that they want, which is fifty gigawatts of offshore wind by twenty thirty. That is a target established through the offshore wind sector deal. That is not necessarily the same as what the UK carbon budgets think that you need for a clean power system.

And the reason for that is you can get Less or more?

Well, you can get away everything. If you look at the system, if you do less offshore wind, you have to just do more of something else, and you have to bank yourself that you can do a lot more of something else. Maybe that's solar because solar's having a great time in the UK market at the moment, you know, and can deploy quite quickly.

Maybe you try and build less generation and you really drive on flexibility.

Maybe you try and do more energy efficiency to reduce demand. There are the the system is like a jigsaw puzzle, and you can change the size of a piece, but then all the other pieces need to move as well. But as it stands, there's a fifty gigawatt target, and so that's what we've modeled against. And you're going to need, like, you know, thirty, forty, fifty gigawatts of offshore wind minimum to get a clean power system, however you move those other jigsaw pieces, and we're not on track for that.

So against the fifty gigawatt target, we think there'll be an eighteen to twenty five gigawatt gap after these next two auctions that we will have to resolve Mhmm.

Somehow in with changes to policy. Maybe you hold another auction.

I I think the message for government is given the look on my face about how you might do that, maybe the thing to do is make sure this auction and the next auction go well and get as much capacity as possible.

And so, yeah, last year was a bit of a disaster. And we've talked about CapEx coming down for offshore wind. I mean, the elephant in the room is it's it hasn't it the last couple of years, it's not going down. There's been supply chain squeezes, raw material inflation raw materials and and, primary energy, Protectionism I mean, the Far East is now Yes.

Beginning to dominate offshore wind, and there's concerns around whether we should be buying Chinese turbines or not Yep. And then some real financial, you know, over leverage and financial challenges from the OEMs Yep. And not that much competition anymore. So it's really tricky supply chain stuff for offshore wind, which is partly the reason why and, of course, cost of capital has gone up.

So the pounds per megawatt hour figure for offshore wind has gone in the wrong direction.

It's gone up in the last couple of years, and that's the thing that we missed we got wrong, didn't we, last year?

The government got wrong Yeah. In the in the round.

Yes. There is sometimes, I think I mean, you can argue quite rightly.

For government, the CFD is about keeping the costs as low as possible for consumers, like, right now because we fund the CFD through Adelvion bills. And given the energy crisis, it's hard to argue with that. However you know, Amber, we know that building more renewables reduces bills in the long run, not least because it avoids us importing as much gas for power.

And I don't think there's been enough thought about the CFD as a mechanism for building that industry, for making sure we have a predictable supply chain, for getting those additional economic benefits in, and strategically ensuring bills are low in the long run. And I think it's that tension that undid them. You know, there was a lot of focus on the short term and not enough focus on actually, in a much more competitive global environment for this stuff, we need to make sure it comes here, and we need to signal to the supply chain that they can keep prices as low as possible. More broadly, that point you made about it's a global market now, and my heretical energy position at the moment is that I think projects are much more material than people have. There's a materiality to the energy transition that people have overlooked in the last ten years, which is really important now.

Have you read Ed Conway's book?

Of course, I've read Ed Conway's book. He wrote the book that I would have written if he hadn't written it better than me and first. Yeah.

He's the goat.

He's the goat. Also, if you're too lazy to read Ed Conway's book, his tweets are also amazing. Yeah. So it it's that, though. There is a global supply chain that that supports the energy transition and actually building traditional energy infrastructure. It's also very expensive to build a gas CCGT right now because the economic environment has changed for building infrastructure.

But we are in competition now with the US, with China, with with India on solar, you know, with Japan on clean hydrogen, with the EU, with the Green New Deal. It it cannot just be that because we've been the first market in the world to do this, we can just kind of expect to get the industry to do stuff like at least cost right now and not be thinking about those wider factors. And I think that is the big question for what the CFD is.

That is the strategic question. Is it your industrial policy, your strategic bills policy, or is it this kind of short term instrument?

Well, let's go back to it then. So what we actually gonna we've just talked about the fact there's a massive gap. Yeah. Between what the CFD the the the AR six and seven are gonna do this year and next Yeah. And what the CFD can achieve. And you I I can't remember the number you said. It's, like, twenty gigs or something that we're Yeah.

We think interesting. Eighteen to twenty five gigs depending on what comes out of this auction. Yeah.

So if it all goes well, we're still short twenty gigs.

Yes.

So so then so so what?

So what? So first so first thing, I would be asking the smart bodies, like the Committee on Climate Change, the National Infrastructure Commission, probably the CCC as it's a statutory role, but also the new energy system operator to model what they think a system looks like and to play around with the numbers on offshore wind and see what's deliverable.

In the report, we say, you know, there are some, like, no brainer decisions that you should be making across the system on things like hydrogen, carbon capture, nuclear, pumped hydro, flexibility assets, batteries, you know, long duration energy storage. There's a whole there's a whole range of other things that you need to do, which gives you the flexibility to change that offshore wind number and work out what is actually achievable and go kind of back to basics on how much do we actually need for what we're trying to do.

I would expect them to be doing that analysis right now. I think the government has commissioned Nissan to do some of it, but I'd say do that as fast as possible.

Define what clean power is because there's a big difference between an average carbon intensity across your system target and an absolute zero target. I don't think we're yet clear on what they're actually trying to achieve as a government. And, again, that changes what you can do because if it's an absolute target, you need more renewables.

If it's a carbon intensity target like in the carbon budgets, you can have some unabated gas on for emergencies. You know, you can flex the system in that way across the year.

So is the play here does twenty we're twenty gigs short on offshore wind? Yeah. And we can't figure out how to get more of that, so we're gonna have to build we're gonna have to do more CCS and hydrogen and things like that to fill the gap. That's the argument.

Yeah. Well, my understanding and I'm expecting to see a lot more sophisticated modeling now. There is a Labour government, and people are really asking about this question. But certainly in the analysis that Labour had done in opposition for their twenty thirty target, there was a big uptick in the amount of renewables deployment you needed, but there was also a much bigger uptick in the amount of flexible generation that you needed, including on hydrogen and carbon capture and storage to help decarbonize gas and and everything on the kind of flexible generation end of the market.

I'm we're hearing a lot about the renewables bit, but we're hearing much less about that other side of the system and that if I were in government, that is the bit that I would be trying to get right. And that gives you some flexibility on renewables.

The other thing is they have overturned the ban on onshore wind, and so you've got smaller scale renewables, including onshore wind and solar now back in the mix. And can you get more from those?

I'm just really nervous about we've we've you've got I've said it a lot of times on this podcast.

We have proven stuff, renewables, which we know is plan a. Yeah. And then we can't we've got a shortfall of a huge amount, twenty gigs. And then the solution is unproven expensive stuff. Yeah. And I just don't I just I can't get my head around it.

Well, it's not I think the the the thing about defining the target properly is it's not unproven expensive stuff necessarily. It's that you keep a couple of gas valve power stations on for, like, two years whilst you're building out your offshore wind. I mean, if this is about whether it's twenty thirty or twenty thirty two that your offshore wind farm comes online and therefore, like, two auctions or three auctions, then how you've defined the target matters because you can have a you can absolutely achieve a clean power system and work your way towards a like, an even like, you're still your very renewables led offshore wind heavy system.

It's it's just two or three years of trying to make all those numbers work.

Exactly. Yeah. I'd rather we I'd rather we try and find that twenty gig of wind rather than surrender to the hydrogen lobby, personally.

I don't so we're technology neutral. Right? And we tend to follow smart advice from people like the Climate Change Advisory, Group CCC.

In every system model I've seen, it's a range of technologies, and the energy UK view on the market is, like, huge amounts of renewables. I mean, the target gets revised up all the time, but let's say seventy five percent that's in the carbon budgets could could go even higher if you can get flexibility right in order to balance the market. Most of that will be offshore wind in the UK. Pretty convinced of that.

But we've also in the cheapest system models, you've also got at least one grid scale nuclear power station, so a Sizewell, as well as Hinkley. And in most of the cheapest system pathways, you've also got to have a solution for flexible generation. And at the moment, that solution is some gas fired power stations that are abated in some way.

That's the collection of stuff. What I think is not okay with hydrogen is it being touted as a alternative to electrification.

Our view is the cheapest system model is one where you electrify stuff up to the point that it's the not the cheapest thing to do, and then you use other technologies to fill in the gaps.

But for something like a twenty thirty target, what I'm outlining is you've got this range of technologies you have to bring on, and it's the order that you bring them on that gets you there or not. And I think it's completely appropriate if you're changing your overall target to have a look at the volumes of stuff that you're procuring and when in the decade you're procuring them. Yeah. We've ended up talking about stuff other than offshore wind.

Yeah. Let's go back to it. So so, okay, what else can we do? Honestly, let's come back to CFD for a minute. What else what else can we do here?

So if we're talking about, like, not whole scale massive reform, things like, you know, whether or not it's, you know, deemed or pay as clear or, you know, without hugely tweaking the CFD, there are still some things you can do to get more capacity away over the next couple of auction rounds, including make sure you have the right size budget and make sure your modeling is better on things like the international supply chain, critical.

But we have also argued for a longer contract length so you could extend the contract length out. And it's these kind of small tweaks to the CFD that just make it that much more attractive and mean you'd probably get more capacity through.

The government have already announced, and we're waiting to see how it works, that they might change the development phase of offshore wind projects by working in partnership with the Crown Estate to do a kind of project in a box thing. Yep. And that will have an impact, I think, on then the markets because in the UK, unlike in some of the European systems, you don't get your kind of grid connection and your consenting, like, done for you in advance of of bidding in.

And, therefore, that's all costed into the project risk and the development that you're then trying to recoup back through the auction.

Labour have announced they're planning on changing that and doing something that is a bit like you get your grid connection and your land, and we'll do the development for you, and you pay us a fee, and then you bid in the auction. So So we already know there must there's going to be some changes to how that works. Our big message at the moment, though, is, like, given how much you've got to do, there is a minimum amount of change that you can probably tolerate through the markets at this stage. The very last thing is there's lots of stuff going on on locational signals, on market reform, and market design, and it is really bitty.

There's kind of code reform going on. There's some strategic market reviews going on at grid level. There's the retail energy markets arrangement review program going on. There's a huge amount of work thinking about market design going across Whitehall.

I think our big ask is, could you coordinate that?

And and I think could you consider that in light of now what you're trying to do for twenty thirty?

Yeah.

I mean, it's loads for for policy geeks Yeah.

It is it's like, what a time to be alive.

I yeah. I've I've thought that often over the last fifteen years. I've I struggled to understand why anyone wouldn't wanna work in energy right now because it's just the most exciting, interesting, socially valuable, intellectually challenging chaos that I reckon we need many, many more interesting people working in.

What's nice is as well is if you're new to it, it's all changing so fast that, actually, you only have to go read some papers, and you know more than the next person who's been doing it for thirty years.

Yeah. I mean, you've asked me about the CFD a couple of times in this, and I struggled to, like, access the detail. And five years ago, I was the specialist on that in my organization. I'm being, like, outpaced by events because it's changed so fast, so I have to phone really smart people who work for me and ask them what they think. And that is just the nature of working in this world. You have to really, really work to stay on top of that of of everything that's going on.

The other big one to talk about is is is grid expansion. Or grid expansion is a bit of a funny word, isn't it? Because that that that means you you solve this by it's always it's always a solving by expansion, not optimization route, and we can argue both sides of that. But how's Energy UK thinking about grid expansion and, essentially, getting more stuff connected to the grid faster?

Yep.

It's the critical thing. And, actually, I should note it's the critical thing for the energy sector, but one of my jobs is to speak to the other, business groups, like, you know, the hospitality industry, the manufacturing sector. And if they don't wanna talk to me about energy prices, they want to talk to me about grid connections because if we're trying to connect a housing estate, a data center, a school, you name it, a factory, you need a grid connection. So it's a it's a whole economy problem. I think both the last government and this government have been absolutely right in making it a treasury responsibility, a kind of prime minister responsibility now, rather than just a energy department responsibility.

It's a kind of strategic thing about pushing change through Whitehall.

And then I it's a mix of planning. We're gonna have to build some stuff, so we need to get the planning permission to build it. That's, you know, pylon, substations, cables, infrastructure, and a conversation with the public about the value of that, a really clear one about why and what we're building.

I think your point about building stuff efficiently. So we need a planning system, market design, regulatory system, which means we build both in advance of need, but as little as possible.

And I want to see what that how you get that balance right between the two. There's unquestionable we need to build a huge amount of stuff and we're behind, but, also, it's funded from bills, and you need to not give any industry a free pass to just build loads of stuff. It needs to be done efficiently.

And there's a big conversation about how you do that right right now.

I don't know how you know, we said we weren't gonna go down the location or pricing rabbit hole, but I can't help it. I don't know how we solve this problem without sorting out locational pricing. Right? Because you the the locational pricing is a proxy for efficient use of wires. Right? And I we've gotta get moving on it.

I think it is unlikely that we will make it. This is, you know, a personal view. So Energy UK is still working through the kind of big changes that came out of Rima in terms of market proposals.

I think the industry collectively has said not nodal in the UK because it's so much uncertainty at a time when we're trying to build a huge amount of very large infrastructure in the UK, but the jury is out on things like zonal and other market arrangements. I think everyone is aware. You need a stronger locational signal somehow through your market.

How you do that is the subject of pretty intense debate across my membership.

I mean, your job's impossible. Right? Because I'm gonna have a go at it have a have a go at empathy now. Yeah.

It's because you've got so many different members, and they've all got some of them have will have projects and certain projects. Some of them build it's the the kind of project that you build and the and the kind of, you know, client or customer base that you have inevitably dictates your view on the right market solution.

Right? So that's just that's the nature of business.

I don't think it is insurmountable in that everyone thinks that there needs to be a more locational price. Renewables are geographic. We're moving to a more distributed system.

The way that people use their energy is changing. Quite clearly, you need a different sort of market design.

Second thing, absolutely, politically, we need ordinary people in their homes to experience the value of renewables as soon as possible because otherwise, I think the wheels will come off net zero. You can't ask people to spend money building huge amount of structure and then not have them immediately benefit from it. I think people won't wait the ten years for those benefits to flow through the system. This is just this is political, not economic.

So we've got to do something to bring those benefits forward. Market design is one of those things, but you can also do it with things like moving the policy levies off bills and offering more targeted support for vulnerable bill pay bill payers. So but everyone agrees that there is a need there.

I think the thing that also everyone is lined on is regardless of the market system, you need to build a absolute ton of stuff, loads more wires, loads more cables, loads more pylons, loads more substations. And importantly in the UK and this is a bit where there's a genuine thing to weigh versus some other systems like, I don't know, ERCOT or Chile where there are locational signals.

A lot of our infrastructure is massive and geographically constrained in that it's gonna be in particular parts of the country, and it's not very movable regardless of what the signal is. And a lot of it will be on the CFD, so there's a whole chunk of the market that will just be off anyway. And then then we have the capacity market as well for with twenty year contracts. This is my way of saying, I think it's really important, but I think it's a more nuanced discussion than we end up having where everyone ends up in their own camp yelling at each other.

And in the u and and the exciting bit of it is the UK is what I've always called a fifty fifty system. We've got large transmission connected nuclear, offshore wind, pumped hydro, big assets, infrastructure funds, pension funds, the guys that like stable, predictable markets. We've also got fifty percent of our market that's gonna come from, like, engaged consumers, EVs, low carbon technologies, you know, onshore wind, which more distributed, solar, which can be very distributed, and on rooftops and in homes.

You haven't mentioned the battery folks yet.

And batteries. You know, there's just there's a kind of, like, centralized traditional world coexisting in the UK with, like, what I call, like, the jazzy fun world.

And Oh, yeah.

We're in jazzy fun.

We're in jazzy fun world.

Don't tell the renewable sector I said that.

And we we can try and work out how to do both. And, actually, I think that's our offering is that this system will be extremely interesting because it's not either or.

Therefore, yes, my job is a nightmare, but it's not just because it's not a kind of vested interest pulling me in different directions thing. It's actually philosophically, I think the UK system is in a slightly different place.

And I've been doing this fifteen years, and I am undecided about the right time and the right way you negotiate all of those challenges.

What I would say is with the Labour government's twenty thirty target is the government has put the emphasis on building a lot of stuff because they have to.

Back on grid expansion, what should we actually do? Because I I I I I railroaded that conversation to bang on about my my nodal fantasy.

You and everyone else in the energy sector, I think. Yeah.

And I think there was a transitional arrangement where you can get to nodal over a couple of decades. But, anyway, let's not talk about Node all the zonal. What do we have to do to get more grid expansion?

What do you wanna see government do? By the way, I think you're right about the timing point.

This is the kind of phasing thing with market design, which would make a lot of the yelling go away, but we we can we could do this all afternoon. Go ahead. Go ahead.

Go ahead. Go ahead. Go ahead. Go ahead. Go ahead.

Go ahead. What do we do on actually building grid for the next few years? Again, the report that we put out was very much like, what can you actually do? Not like, what can you do in five years, but what can you do right now?

And we on transmission, the big problem is the queue. It's kind of first come, first served. We've we're advocating that it be more done on, like, stuff that actually gets like is likely to get built. So we had seven hundred gigawatts in the transmission queue at the time that this report was written, and it actually went up because the industry is speculating about what might happen with the queue.

So we're above eight hundred gigs now, aren't we?

Yeah.

We're above eight hundred gigs.

Like, something has to be done with that, and it's gonna, yeah, it's gonna have to be some methods that everyone gets upset about about whittling that queue down. That is the priority there. So that's the first thing. There are lots of good ideas about how you might do that, but that's priority number one.

Priority number two, I think, is So one that when is that gonna happen?

They're they've been told to start doing it. And, again, some of these answers are like, because we've got a brand new government in, but I think grid will be top of their list But everyone has spent the last however many years telling government the grid is a problem. Yeah. And I'm you know, they are working closely with the the new energy system operator, on which note the second most important thing they can do is get the strategic spatial plan done. And that means in the absence of, like, funky market design that might tell you where to put stuff, the system operator saying here's where we need stuff critically, and therefore, here's where we need to do a lot of building out of infrastructure.

So who's doing the strategic way of doing it for you.

Plan.

The strategic Right. Spatial energy plan. Have you not come across the SSEP?

I have, but I've also, my job is to ask questions like I haven't.

Okay. Right. Understood. So the the SSEP is will be commissioned from the new energy system operator.

I think it has now been commissioned. It was due to be formally commissioned this summer and to report back as soon as possible. And, like, on timelines that feel vague, like, no one is gonna get any sleep there, you know, preferably this year, if not early next year. And they're doing that alongside National Grid who are the, you know, the engineers behind where do we need stuff on the system for making sure, you know, an usher is where it needs to be and blah blah blah.

So that it's those bodies together. That was what was recommended by the Nick Windsor review into how we speed up grid, and a lot of the Windsor review was very good. So we've said things like just crack on with that. Yeah.

There was a there's lots of acronyms in grid stuff. There was a transmission acceleration program that came off the back of the Windsor report, which is about how do you speed up this process? How do you speed up kind of consenting, planning, building?

Do all of that.

We'll put a link to the Windsor report actually in the the show notes.

It's well worth, It's really good.

It was really solid. I mean, you know, Nick Windsor was definitely coming at it from a kind of engineering, you know, more planning point of view, back to our conversation about markets.

But it was just a really, really good piece of work and had so many good ideas in it. So the answer on grid is crack on with a lot of that. There's another thing about how you get enough of the kit into the country and with the new labor government coming in and then shaping GB Energy. I think there's still an outstanding question on whether they can use that body to try and get the procurement of cabling, and other components for the build out of transmission done more efficiently.

So do you guys do you do you guys know what GB Energy is now?

They have said some things about what GB Energy will do because the foundation statement has been published, and it was slightly surprising in that it did focus heavily on offshore wind and this new partnership with the Crown Estate to do offshore early stages of offshore wind development.

In previous announcements around GB Energy, they've also talked about investment in early stage technologies to try and get an industrial advantage, hydrogen and carbon capture, and they've also talked about investing in community energy renewables projects.

Like, what we basically said about GB Energy is great. Use it as a vehicle to kinda get stuff started where the market doesn't want to do stuff or hasn't historically done stuff as effectively, and we're fine with that. Everyone gets a bit jumpy when they think it might be duplicating stuff. The market's done very well. But so far, it looks fine.

The new chief fig the the new chair of GB Energy is Juergen Meyer, who is in charge of Siemens in the UK and is a very, you know, well known, well liked figure in the industry.

And he's got supply chain experience, which I hope is good.

My hill to die on is that I think they should be using it to do some stuff on the supply chain, and I would love to see more of that.

Just spend some money getting offshore wind right, surely.

I well, that's what they seem to be using it for. Yeah. That I would really, really like to see it used to do some, like, block procurement of stuff like cables and and trying to somehow underwrite the industry risk on booking ahead on factory slots, that kind of thing.

Because, you know, as previously discussed, that is a constraint on us being able to build stuff out as quickly as we'd like to.

Everything comes back to Ed Conway, doesn't it?

Everything comes back to materiality of projects. Yeah.

Alright. Last two questions.

Okay.

It's kinda broader. Firstly, is there anything you wanna plug? Now's your chance.

Energy UK is a really great membership association, and you should totally join us if you're in the energy sector. And you can find us online, and there are good membership links there. You can hear more stuff like this from me more often, but also from a much more expert team of people who will answer all your complicated energy questions.

And So it's not just for the big companies, it's for small companies as well?

Yeah. We've got a long tail of kind of smaller members who join to work with the larger members, but also because they are the big innovators in their market. You know, they are the people thinking about how to do, you know, blockchain or heat pumps or batteries or, you know, flexible market design. You know, we've got all kinds of folks on on that end of the system in particular.

So, yeah, get involved. That's my first thing.

Even if just for the events?

Even if just for the events. And thank you because I was gonna say it's our annual conference coming up on the seventeenth of September in London. We always get really good speakers including, you know, ministers from government and in interesting people from industry, and they'll be talking about Mission Possible and kinda deconstructing it. And there's good networking there.

And very lastly, the Young Energy Professionals Network. So if you're listening to this and you've been working in energy for less than ten years, you can join the, Young Energy Professionals Network. I love them. Whenever I do anything with the EAPS, I'm the most inspired I am at work because it's people who are new to the sector advocating what they want this industry to be. And we run a annual awards which is held in the autumn of every year, and the entering the entries for that are open at the moment. And the survey is open right now for what we want young people we want young people's views on the energy sector, and you can find all of that if you Google the Young Energy Professionals Forum.

Yeah. Big fan of the YEPs. We've got quite a few YEPs in the Moda office as well. Yeah.

And then this is a difficult one because it's almost like you're you're because you represent so many folks. But I'm gonna ask you about your contrarian view. So Yeah. Do you believe that not necessarily the rest of the world believes?

We've actually talked about a couple of them that like, my heretical beliefs. One of them is this idea that the next ten years will be a lot more about materiality than money, as it were. There is enough capital out there in the markets. If you get a decent market design, you should be able to make the money move.

What's stopping stuff getting built now is actually the availability of, like, workforce supply chain. It's kinda competition from other markets. It's stuff that is the industry has not really thought of holistically in that way, and it speaks to the broader economy, not just to the energy sector. So you need quite a sophisticated view on things like commodity markets in order to get the next ten years right.

That's the first thing. And and you said it, protectionism, in a world of, like, much more protectionist policymaking and politics, what that will do to an industry which is dependent on a global supply chain, I think that's a really big area of policy we're not thinking about enough. Yep.

So that's my big but my the one I really want to get out of my system is Come on.

Let's do it. This is therapy.

I've I've done in every single job I've been in, the industry thinks mostly economically, whereas our customers and politicians think emotionally.

And, you know, things like the onshore wind ban in the UK came about not because of economics, but because there were a small group of conservative MPs, but they're very you know, a large group of their very loud constituents that just didn't like wind turbines. It was a feeling. It was a kind of and then it became a kind of political allegiance feeling, you know, that bled into your wider views on renewables and net zero.

And if you if we get that wrong as an industry, if we think that this is just about making an economic argument, you know, renewables are cheap, we'll build factories in your community, you know, I think we'll be in trouble. The Inflation Reduction Act in the US has unquestionably delivered more factories. It's delivered more jobs. It's delivered a bigger industry in the US for renewables, often in Republican states.

Biden did not get a poll bounce from that, And I've been thinking about that a bit, particularly with recent election results in, Europe and the UK.

We cannot go into government and go to the public and just make a message about the economics. I think that's powerful, but I don't think it's enough. I think we need to kind of reach people here, and that will be different for different publics that we're speaking to.

So I really advocate for more people in STEM professions joining the industry, obviously. We need lots of those. But I also think we need some good communicators and storytellers over the next ten years, and we will be wise to listen to what politicians tell us, not just going in and getting frustrated when they don't do the maths properly.

Hear. Hear. Couldn't agree more. Thank you very much for taking the time to join us on the podcast.

We talked about loads of stuff. If you're listening, there's gonna be loads of links in the show notes. Check out Energy UK. Sign up.

Go through events. And if you're, yeah, first ten years in the industry, you've gotta become a yep Yeah. And join the community. It was really valuable to me when I was at that stage.

And, lots of you get you get to speak to some awesome people.

And maybe we we can have a conversation like this again in six months or twelve months when we've got more evidence of what's actually happening, and then we can decide whether it's working or not.

Completely agree because it's so fresh at the moment, and parliament's on recess. So we had a kind of flurry of activity, and now, you know, parliament's gone back for the summer. I think September, October, November are gonna be completely fascinating, and it maybe it would be good to talk in the New Year.

Alright. Well, thanks again for coming on, and we'll have you on soon.

Thank you. Thank you for having me.

Thank you for listening to Transmission, a MODO Energy podcast. Transmission delivers conversations from industry leaders and experts exploring energy markets and the operations and technologies related to grid scale battery energy storage. Check out our other episodes by searching Transmission wherever you get your podcasts.

Check out the Energy Academy, our video crash course on how markets in Great Britain and ERCOT work, or head to motoenergy dot com to see our written research. Thanks for listening.