A grown-up conversation on UK energy

Paul Golby is frustrated. He doesn’t actually say so, but the measured tones of E.on’s UK chief executive have a note of exasperation. “We are a ‘no’ society: ‘no’ to coal, ‘no’ to nuclear, ‘no’ to wind turbines. But then how do we keep the lights on?” the 58-year-old former engineer asks. “Most people just don’t connect the fact that the TV runs or the fridge works with how the stuff is produced.”

Such sentiments may be no surprise from the man whose plans for a new coal-fired power station at Kingsnorth in Kent are a long-standing bête-noire of green activists. Not to mention E.on’s keen interest in the burgeoning nuclear renaissance. But straight-talking Dr Golby is nothing if not fair. “Our industry is not trusted,” he admits. “And we have not done well in explaining things. Somehow we have to get better at explaining that people can’t have low-carbon, cheap electricity and no power stations or wind farms within sight.”

It is not going to be easy, not least because the PR challenge has as its backdrop the biggest reshaping of the UK energy market for a generation. The industry faces a dizzying array of competing priorities, none of which can be sacrificed for another. First is the looming energy gap. Notwithstanding a slight recessionary dip, demand is inexorably rising. But within 15 years, a third of Britain’s electricity generation will be turned off, as EU environmental regulations bite and ageing nuclear reactors are retired. Then there’s climate change. Again the timetable is tight. National emissions need to come down by 34 per cent by 2020 and at least 80 per cent by 2050, according to government targets.

Part of the answer is nuclear. Eon has teamed up with RWE to build 6 gigawatts of capacity, with the first two plants expected by 2020. But to scale the nuclear sector up from state-owned dirty secret to shiny commercial mainstay of the green future requires a series of tightly choreographed steps from both government and industry, with little room to manoeuvre. “It is possible, but there isn’t much slack,” Dr Golby says.

The renewables sector is equally pressed for time. The UK share of the Brussels target is for 15 per cent of energy, which means around 35 per cent of electricity, to come from renewables by 2020. But ramping up to industrial scale requires massive investments in wind farms, particularly in technologically inhospitable offshore regions, as well as a reorganisation of the grid infrastructure, and significant growth for the sector’s supply chain.

With help from the newly boosted government incentive scheme, the business case for E.on’s vast London Array project is finally made. But industry-wide, planning delays, supply chain bottlenecks and a weak carbon price all put pressure on timescales.

The biggest challenge is planning. Although the Infrastructure Planning Commission is due this year with the aim of cutting delays, there is a lot of ground to make up.”We’ve got a lot to do in 10 years,” Dr Golby says.

Then there is coal. Notwithstanding repeated protests over Kingsnorth, concerns about security of supply have put coal firmly back on the agenda. But all new plants will need carbon capture and storage (CCS) technology, and so far CCS is largely theoretical and hugely expensive. Unless Kingsnorth wins the government-run competition to fund trials of CCS, the new power station will have to wait.

“The biggest demonstration of CCS so far would probably fit in this room, but to equip Kingsnorth it would have to be on the scale of Wembley stadium,” Dr Golby says, indicating his fairly modest office. “We can’t fit CCS unless we get some money from government. So if we don’t win the competition, there will be a gap between the current power station closing and our being able to build new one.” He does not make an explicit link with the looming energy gap, but he doesn’t need to.

The energy sector has already undergone a transformation. In the wake of privatisation, only the biggest can command the scale of investment needed, initiating a wave of global acquisitions. Dr Golby has seen it first hand. He moved into the power industry 10 years ago, and by 2001 was a director at Powergen, becoming chief executive when it was taken over by E.on the following year. “The electricity industry is going the same way the oil industry did 30 years ago,” he says.

But the deepest pockets in the world are nothing without clarity from government. “At the moment the Government puts sticking plasters over individual problems as they arise, rather than standing back and putting together a master plan,” Dr Golby says. It is a matter of deciding on what is needed to deliver the 2050 targets and working backwards.

“We aren’t looking for a detailed, Moscow-style plan,” Dr Golby says. “The Government has always intervened in energy markets to try to force outcomes, in this case for much lower carbon. Let’s have grown-up conversation and work out how.”

The other grown-up conversation is the one with customers. When the Queen opened the first nuclear power station 50 years ago, the promise was of power so cheap it would not even be metered. But the future turned out quite different. Energy companies are already deeply unpopular after last year’s sky-high prices coincided with unprecedented profits (albeit from different parts of the business). But bills are going to keep rising – ratcheted up by expensive carbon-busting technologies and the scarcity of fossil fuels.

For the public, there must be a cultural change. “People moan about energy prices but we waste a third of the energy that’s produced,” Dr Golby says. “Drivers know how many miles their cars do to the gallon, but I doubt anybody has a clue about the kilowatt/hours of their house.”

But the industry must also do its bit to change the terms of debate. “We need to be more direct and honest,” Dr Golby says. “Politics is based on benefits today that somebody pays for tomorrow. But with energy we have to pay today so our descendents have a planet worth living on. But it is difficult to sell.”

Source - The Independent