What have Renewables Ever Done For Us

I few weeks ago I drafted an article defending renewables. It never saw the light of day but I thought I would publish it here.

As a fundamental basis for our economic prosperity, the provision and price of energy is of vital importance. Energy price increases are never good news and will always attract debate, but the focus should be on the long-term. Trying to save a bit of money now only to be faced with much steeper increases in future is not what anyone wants but when we talk about reducing or removing renewable subsidies, in reality that is the direction in which where we are heading. That is why the Chancellor, quite rightly, is expected to maintain the current level of subsidy support under the Renewables Obligation (“RO”) regime when he presents his Autumn Statement. But what is it that we are actually paying for? The media, politicians and energy companies have spent a lot of time in recent weeks debating so-called ‘green levies’, and the use of such broad brush terminology has only served to confuse and cloud the issue.

The impact of green levies on your household costs is currently limited to around £120 per year, or about 10%, of the typical annual gas and electricity bill.  

Some commentators would have us believe that this all supports investment in renewables, particularly wind. That is simply not true.  

When you look at the cost of green levies the biggest single component – at nearly half the total, and possibly doubling next year – is ECO, an energy efficiency scheme.

If politicians want to deliver a meaningful and immediate reduction in energy bills, this is the area to focus on, as the scheme, despite its benefits, is placing too much burden on bill payers.

Another contributor to bills is the carbon floor price. Let's be clear: this is a tax, raising significant sums for the Treasury. It is probably adding only around £5 to your energy bills now, but that could quadruple in the next two years.

The Renewables Obligation scheme accounts for only £29 per household per year. It represents less than one quarter of the total cost of these Government schemes,and less than 3% of the typical energy bill.

This £29 has grown only modestly over the past 11 years, and is set to continue this modest rate of growth over the coming years. Onshore wind – contrary to popular belief – accounts for just one quarter of the total RO cost, so less than 1%of the total gas and electricity bill. Of all the schemes in place, the RO easily delivers the greatest value to the UK. It supports clean, affordable, domestically generated power. It is efficient in that it only provides support when electricity is actually produced and is a valuable driverof job creation.

By the end of 2013, renewable output will exceed 50 Terra watt hours for the first time. At nearly one sixth of total UK power demand, this output  is the equivalent of 7 new CCGTs, which would require an additional 1.7 billion therms of gas imported annually from Russia, the Middle East or Norway. One alternative would be to run our coal stations harder.  This would drive carbon emissions up by around 40 million tonnes and, more importantly, is an unrealistic possibility because the upgrades required for these ageing power stations have already forced several closures, with more to come in the next year or so.

The renewable industry is also serving as a catalyst for regeneration in manufacturing centres such as Humberside, Tyneside and Glasgow. It has contributed significantly to the development of both our energy infrastructure and the economy. It directly employs around 110,000 people in the UK and supports a further 160,000 jobs in its supply chain. It has stimulated academic teaching and research, with at least 12 universities offering renewables-related courses. And the industry has reached a level of maturity now where it offers a valuable source of income for our pensions and savings schemes. 

At £29 per household per year this represents exceptional value. This is £29 that is helping to diversify our energy mix and keep our energy supply secure. It is £29 that  is helping to reduce the impact of wholesale energy prices on consumers and lower our country’s carbon emissions.

We cannot influence wholesale gas prices - the primary reason for rising bills - but we can gradually become less reliant on gas and therefore protect ourselves from increases in bills that will be even less tolerable than they are currently. Renewables can and will rise to this challenge.

The government’s duty is to plan for the long-term prosperity of this country and that means continuing to invest in renewable energy, when the easy thing to do for short-term gain would be to stop. This is the time to keep the faith and invest in an industry that will help protect us from an otherwise inevitable future of rising bills.

Two key pillars of economic development

I gave a speech to the Glasgow dinner of the Institution of Civil Engineers last week and here is the core of the remarks I made.

Energy and engineering have always been closely linked and, indeed, have been two of the key pillars of our economic development over the last three hundred years. It was engineers like Newcomen and our own James Watt who unlocked the secrets of steam power and allowed us to use the energy in our coal that in turn transformed 18th century Britain. Engineers took that unleashed energy and added innovation to age old processes in industries like cotton in Manchester  and ship building here in Glasgow and made Britain the industrial colossus that bestrode the world. Civil engineers used the new availability of non animal 'horse power' , a term incidentally coined by Watt himself,  to shrink the world with canals and railways.

Energy and engineering then unlocked the second revolution in the 19th century. Engineers found out how to extract, distill and  tap into a new source of energy, oil, and then turned their minds to democratising transport with the internal combustion engine. The Civil engineers got into the act by designing and building the road network we are still using today. This transport revolution lasted until well into the twentieth century and it continued to transform our country. North Sea oil, from the 1970s onwards has been a major driver of the Scottish economy and it has placed Aberdeen on the World map. We now take motorways for granted but construction of the M8 only started in 1965, after I was born, and was only finished 33 years ago.

Then during the twentieth century we had a third energy revolution with the coming of the age of electricity. The National Academies of America decided that electricty was the single biggest innovation of the whole century, simply because all other advances in fields such as healthcare and communications depended on the availability of electricity. Building on the work of engineers like Edison, Swann and Westinghouse our immediate predecessors transformed the lives of millions by bringing them light. The civil engineering feats of the hydro engineers of the 1950s and 60s is truly astounding as I witnessed in a 24 hour nonstop trip around the North of Scotland to visit  34 different  hydro power stations this summer. Our modern world is now completely dependent on a reliable power supply as events on Arran and Kintyre earlier this year illustrate. We truly life in an electric age. 

That of course brings us to the 21st century when I believe we need another energy revolution lead by engineering innovation. Why do we need that revolution?

We have to decarbonise our energy production to avoid global climate change that would undermine the security and economic well being we expect for ourselves and our children

We have to reduce our dependency on finite resources like fossil fuels that will get increasingly difficult and expensive to find.

We have to power a digital economy that depends on reliable supplies whilst at the same time make sure that people can afford to pay the bills.

That threefold challenge depends upon us addressing two key areas; how we behave as consumers and citizens and secondly, what we design and build. For obvious reasons I am going to address the second and I can see three areas where the engineering profession needs to come to the rescue of the energy industry.

1. How we produce electricity. Gone are the days of building ever bigger fossil fuel units. The power system of the future will have lots of local and distributed generation sources. Zero carbon energy will be the norm and we need engineers to get the cost premium down, be that in offshore wind or nuclear. We need our universities and R and D firms to look at the next stage in technology again be that in nuclear with fusion or renewables with marine energy.

2. How we distribute energy. Our local power and gas grids, the wires and pipes in your streets, are dumb, it is an analog system. It needs re-engineering to make it fit for the 21st century so that it is self healing, responsive to two way flows of energy from multiple sources and smart in how it operates. A wide spread uptake of electric vehicles will present a major challenge to our grids. Engineering, combined with behavioural economics, will have to give the answers.

3. How we use energy. Here my main message to a group of civil engineers is that our buildings, be they homes, offices, factories or leisure facilities like this hotel have to be an order of magnitude more energy efficient than they are now. Our built environment stock is an international disgrace and that is why fuel poverty is such a British disease. We  need radical and innovative solutions to both what we build now and in the future and how we go about retrofitting our existing buildings.

 I was in the  Royal Society building in London chairing a conference on heat. But I found out something far more interesting. In 1759 one of the Society's top Prizes, the Copley award was won by a gentleman called John Smeaton. He is known as the first civil engineer but the prize was awarded for his work on the extraction of power from water and the wind. a man before his time and he  was only 35 years old. We need people like John Smeaton, young people, to yet again shake up our energy industry and our engineering profession.

If during the industrial revolution engineers unleashed the power of fossil fuels, and during the transport revolution harnessed the power of oil and in the electric revolution realised the power of the grid, we need engineers to unleash, harness and realise the power of zero carbon energy in the 21st century energy revolution. 

A week in the life of...

I am asked quite a lot now about what I am doing and how I fill my weeks after having spent nearly 11 years in an all encompassing, more than full time job. I guess I now have what many people would call a portfolio or plural career with a number of non executive and part time jobs. I deliberately wanted to keep quite busy but not silly busy and I think I am sort of achieving that, although my wife says I am away as often as ever! This week is in many ways typical as it involves trips to Glasgow and London but a quiet Monday morning and Wednesday afternoon. In between I will have managed an involvement with 9 different organisations.

1. I attended an Audit Committee update wearing my John Wood Group hat.

2. I spoke at an energy policy debate at Edinburgh University

3. I visited the first turbine to be produced by a tidal energy company I am involved with.

4. We held a management meeting of the software company where I have an investment.

5.  In my role as President of the Energy institute I chaired a heat summit.

6. I chaired a board phone call for Infinis Energy.

7. Then its a Maggies cancer charity finance committee to attend.

8. As chairman of Scotland's 2020 group I will be speaking at a dinner for Civil Engineers in Glasgow. 

9. I have an induction day at Aggreko.

On top of that I have had a few cups of coffee with contacts and friends and responded to the usual welter of emails and to started to think about my visit to a 10th organisation on Monday, which is another of the energy related SMEs I am involved with. Never a dull moment!

A minute in the life of......

I came across a snapshot of a single minute in the life of our data driven world.

Facebook.  208,000 photos uploaded.

Twitter.    350,000 tweats. 

 YouTube. 100 hours of video uploaded.

Google.   3.5 million search queries.

And those numbers are going up all the time. 90% of the data which currently exists was created in the last two years. 

You can ring my bell

Over the last few weeks I have been kept busy working for a company called Infinis Energy. It is a pure UK renewables business so was right up my street. It has performing assets in three different technologies; landfill gas, onshore wind and hydro. What has been different for me is that I was approached to be Chairman as part of the preparations for a listing on the London Stock Exchange. I have never been through an IPO (initial public offering) before and found it very interesting and, at times, frustrating. It involves a cast of thousands. I counted five different investment banks, three law firms, two corporate finance advisors, a specialist adviser on landfill gas and one firm of accountants. The conference calls, which at times were running at more than one a day, had so many people on them that I thought they might crash the system. 

It is also a very bureaucratic and legalistic process. The company had to issue a 250 page prospectus which amongst other things includes a very long list of every possible risk, to the extent that I thought we should have included the risk of a meteor hitting one of the Infinis sites. We had to have a number of Board meetings and I dread to think how many trees were sacrificed to produce all the papers. Everyone seemed to be issuing comfort letters to each other and everything had to be verified. 

On top of all this the business had to be marketed to investors. I got involved in something called 'pilot fishing', a term which seems tautologous at best as it involves initial discussions with potential investors and then the Management team spent nine days on a roadshow covering the UK, the US and Germany. They had over 40 one to one meetings as well as group lunches and video conferences. At one point the database of investor contact had over 700 individual fund managers being tracked.

This all came to head on 20 November when Infinis became the latest company to list on the London Stock Exchange. The management team were invited to a nice little ceremony to mark the start of trading, like the bell ringing ceremony in New York. They kindly invited me and it was a really good way to mark the end of the IPO process and the beginning of life as a quoted company. 

As a result I know find myself the Chairman of a public company board. Will I have to grow up now?

The Seven Ps of Effective Travel

I gave a key note speech at a conference on Scotland's clean air initiatives last week and it got me thinking of the hierarchy of travel options. I have used as my guiding principles the need to reduce both carbon emissions and air pollution, particularly in our cities. I have come up with a travel pecking order of 7 Ps:

1. PEACE. It is always best if we can avoid actually having to travel in the first place, partly because it can waste so much time. Modern technology like video conferencing, skype, face time and conference calls should always be the first option we think about.

2. PEDESTRIAN. I feel a little guilt promoting this one as I have a bad leg which makes it difficult for me to practise what I preach but for our local travel it should always be an option.

3. PEDAL. The second active option we should think about. Every time I go down to London I notice an increase in the number of bikes on the streets. The 'Boris Bikes' have made cycling easy for ad hoc journeys and Londoners are responding.

4. PUBLIC.  If we can't use our own energy to get around then the shared options are the next best. We have to use modern, digital, technology to make public transport easier to use. Apps for journey planning and real time data feeds are obvious steps we need to take. Maybe Edinburgh, with its new tram, can take a lead here. 

5. POOLED. The other shared transport is car pooling or lift sharing. Businesses should give incentives to staff who car share, like reserving the best car park spaces for their cars.

6. PLUGGED. New vehicles are being developed all the time with all electric cars, plug in hybrids, hydrogen buses and LPG fleets having a role to play. These have lower emissions than conventionally fuelled vehicles.

7. PETROL.  Our final choice, the last resort if you like, should be the private car (be it petrol or diesel). All too often, however, it is our first or default choice.

The challenge for policy makers and organisations is to make options 1 to 6 easier to adopt more often and then we will use them more often. If we just hit the car user over the head or in the wallet we will not get the sustainable behaviour change we need. 

An Element that changed the world

I have just finished John Browne's new book, 'Seven Elements that Changed the World". It was the last section, on silicon that really struck me. That humble element has changed the world in four different technological areas; three of which are still having a profound impact today.

Firstly there is glass, whether it is the highly decorative ornamental glass from Murano in Venice or a common window we tend to take it as a given. However, it was only in 1845 that the window tax was abolished in the UK and the use of glass started to transform our built environment. This was given a kick start by the Great Exhibition and its Crystal Palace which contained 300,000 panes of glass. Glass hasn't just changed our homes and cities, it also changed our view of the whole universe when Galileo looked through his telescope and realised that the Earth wasn't at the centre of the Universe. 

Secondly, we have the use of silicon in photovoltaic cells to produce electricity. The scientific breakthrough came from Chaplin, Pearson and Fuller working at Bell Labs in the mid 1950s. As Browne puts it, this discovery was so important because " in one year, more energy reaches the earth's surface from the Sun than will ever be extracted from all the sources of coal, oil, natural gas and uranium. In one day, the earth's surface receives 130,000 times the total world demand for electricity" Whilst in the UK solar is still only a niche product it is revolutionising the lives of people in sub Saharan Africa who don't have access to mains electricity.

If that wasn't enough then silicon forms the base material of the integrated circuits that are at the heart of all modern computing, including the iPad I am typing this entry on. The forerunner, the transistor, another product of Bell labs, won for its creators Shockley, Bardeen and Brattain a Nobel prize and after a period of development up until the mid 1960s "the exponential rate of increase in computing power and the consequential reduction in the cost of that power has been going on ever since." As a result, Browne points out, the typical smartphone contains more computing power than at the whole of NASA when men landed on the moon.

Silicon is transforming one last part of our lives; communication. The use of fibre optic cables is the backbone of the internet which connects more of us everyday to more and more data and information. I can be half way round the world and download vast reams of Board papers in seconds. At times this doesn't feel like progress! But when you stop and think of the revolution in communications we have seen in our lifetime it is incredible.

If the 18th to century were the Carbon age then the 21st century certainly feels like the silicon century.