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The second episode of our brand new, six-part podcast series Net Zero Nudge explores how decarbonising energy will play a crucial role in the drive towards reducing emissions and achieving net zero.
John Breakell, Partner, Consulting, Energy & Resources, Ernst & Young LLP joins Matt Hastings, Deputy Director of Ofgem Strategic Innovation Fund for an insightful discussion around the following questions:
What is the role of private enterprise in driving innovation?
What role will domestic gas play in the UK energy mix?
What opportunities will emerge for the supply chain with the renewed focus on nuclear and plans to triple capacity?
Key takeaways:
Understanding of the role of private enterprise in driving innovation.
Understanding of the role domestic gas will play in the UK energy mix.
The opportunities that will emerge for the supply chain with the renewed focus on nuclear and plans to triple capacity.
Podcast transcript: How can sustainable energy drive sustainable growth?
40 min approx | 14 December 2022
Speaker Key: Ed Reed, John Breakell, Matt Hastings
Edward Reed
Hello and welcome to the second episode of Net Zero Nudge, a podcast boxset series by Energy Voice in association with EY. In this podcast series, we’re aiming to move beyond the ideas that we sketched out in The 10 Point Pod, our forerunner series with EY. That’s where we looked at the government’s plans, and now we’re going to try and drill down into how to achieve these big plans, aiming to deliver both net zero and some economic benefits. I’m excited to welcome John Breakell, Partner at EY, and Matt Hastings, Deputy Director, Ofgem Strategic Innovation Fund.
In this second episode, we’re looking at decarbonised energy. As we head into winter, eyeing the weather forecasts and perhaps clutching our hot water bottles, the ideas around providing decarbonised energy feel like they’ve taken a bit of a step back. Here in the UK and in other parts of Europe, governments have taken some degree of comfort in some of those old energy sources like coal-fired behemoths that even as recently as the beginning of the year we may have thought consigned to the history books. Fossil fuels are fighting for a place in a world where the sights have been set on net zero and it depends on who you ask, but there is an increasingly vocal defence of North Sea production of gas, of oil, and also some new thoughts about onshore fracking.
But even moving beyond that question around fossil fuels and their relevance in the UK, there’s a real important question of what a clean source of energy is. The government has talked up fracking and that’s controversial in some areas, but there’s also areas such as nuclear energy, clean to some, very dirty to others. And it also has the aim of achieving energy exports by 2040. Higher prices at least in the short term are going to drive energy-saving efforts, but the UK has got clear hopes to cover more of its own needs. With war in Ukraine, much of the continent is thinking about the energy trilemma in new ways of balancing security, affordability, and sustainability.
John, I’m going to start with you on this question that we often see around renewable energy. The UK has got big plans to scale up generation, particularly from offshore wind, but does this mean we run the risk of the lights going out if the wind isn’t blowing or if the sun isn’t shining on those solar panels? What then?
John Breakell
Hi, Ed. Great question and thanks for having me here today. Yes, absolutely. Look. Ten years ago this would have been a massive issue, but I feel like the energy debate has moved on. The old adage of the energy trilemma, security, affordability, and accelerating the pace to net zero. I feel like debate has moved on to actually say, that old construct is eroding and we can actually get to a place where we can have it all. The challenge for me is, we can’t have it all today, but we can have it all in the future. What’s the strategy and what’s the plan to actually get us there?
Reed
Matt, should we not be concerned about this intermittency challenge around renewables anymore? Have we moved beyond that?
Matt Hastings
Yes. I think so. We’re in a world now where we’ve moved on from a centralised power system dominated by a small number of large plants to a much more decentralised system. With digital innovations and other process and system innovations, I think we’re only going to see an increasingly more complex and dynamic energy system as we move forward. Some of those, I’m sure, listeners will remember the early days of the solar boom where the very thought of a solar farm was madness. In fact, I remember standing with a Cornish entrepreneur in 2008 on a field where he wanted to turn it into a solar farm, an idea which I found completely ludicrous. I was trying to convince him that a micro-pumped hydro-storage system would be much more effective. Lo and behold, he was right, and I was very wrong.
So, the world in which we are now where we’re seeing growing penetration of electric vehicles ultimately giving that storage and flexibility that a high-renewable system really needs. We are seeing increasingly larger amounts of batteries enter the system. Some of the work that Innovate UK has funded on their Prospering from the Energy Revolution programme where we’ve got transmission-connected batteries at scale providing really high-speed charging to Oxfordshire in particular as a pilot there and really starting to see, I think, this more intelligent energy system, this smarter system trying to emerge both at a national level but also a local level.
Really, I think that is a combination of not just the generation side or more intelligent demand and demand-side activities but also, I think, smarter networks, transmission, distribution, electricity and gas, as well as system operation starting to evolve in the face of this unprecedented challenge around net zero to deliver the kind of smarts that will mean that the lights shouldn’t go out. I think it’s also really important to remember that we live in a global energy market and a European energy market, and the UK isn’t an island in power terms. We’ve got multiple gigawatt interconnectors who connect us to mainland Europe, and we are constantly trading power with our European allies and neighbours through those interconnectors. So even when the wind doesn’t blow, I think having that mix of micro and macro storage plus those interconnectors and smart systems gives us the kind of resilience that we didn’t really have a decade ago.
Reed
John, Matt’s going to turn that question into one about the grid and balancing that supply-demand balance. Do you see the problem in the same way? I suppose historically we might have seen supply and demand as quite separate, and I suppose that’s a division between generation and delivery. Do you see this as a breaking down in the same way that Matt does?
Breakell
Yes, absolutely. I think the opportunities that we’ve got now with the diversification of our energy suppliers Matt was talking about are absolutely huge. We’re talking about introducing a new wave of nuclear into the UK energy market. We’re talking about huge penetrations of offshore wind, potential for onshore wind. We’re talking about actually power generated in the home and the flexibility of having every home with an electric vehicle providing power back to the grid. These are energy sources that have huge potential to unlock our security challenge. For me, it’s really about the strategy of how we deliver, and we enable that energy system to come to life. There are huge challenges in that.
If you pick a couple, one of the ones that’s top of my mind is consumer. How do we unlock the consumer potential and the consumer demand-side response elements of that security strategy? Some estimates put the consumer role to play in that energy mix of up to 40% of peak demand. That is phenomenal if you look at what we have to achieve. But the narrative really needs to move on in the UK. We talked about energy for ten years and you’ll have seen this in the news over the past two weeks. We talk about energy rationing. We talk about risk to supply. But actually, the debate needs to move on to the smart use of energy, the democratisation of energy, the ability for the consumer to participate in the energy system. We’re quite a long way away from that narrative, I think.
Hastings
Yes. I think that’s a really good point. There have been a number of different trials looking at new business models to do with things like peer-to-peer trading. Why is it that a consumer with solar panels can’t simply sell their excess generation to their next-door neighbour? That’s ultimately a flaw of the current market. I agree with you, John. I think we need to change the narrative and change the market in a way which, I suppose, incentivises consumers in the same way that we currently incentivise large-scale generation.
Just going back to what we were saying about flexibility, I think the Carbon Trust’s recent report on GB Flex [?] where they identified £16.7 billion of net savings per annum by 2050 if we can develop this fully flexible macro and micro energy system, consumer-led… I find it really interesting that we’re just at the stage when this podcast is being recorded of the Conservative government investing approximately £100 billion in an energy bailout ultimately to support consumers through this really difficult time. You think about 100 billion in the grand scheme of things.
I think the CCC, the Committee on Climate Change, estimated that really to achieve net zero we’d need to invest 50 billion per annum for the course of the next few decades. Obviously that sounds like a big number, but 50 billion when you incorporate all of the investment across the whole of the private sector, not just the money coming from the public sector, actually feels achievable. I feel like we really need to, going back to what you’re saying, John, about that changing the narrative, have a much more long-term strategic delivery plan for net zero which delivers the benefits in the right way to the right participants in a market design that is fit for the future, not one which is built for the past.
Reed
I think there’s been some really interesting ideas there around that question, I suppose, of individuals and households and communities. Everyone, I think, at the moment seems to be interested in getting solar panels to put on their roofs, but I think there’s still some quite interesting opposition, isn’t there, plans to put solar panels in farmland. Do you think that renewable energy is going to change that community drive, that desire for energy solutions, I suppose particularly when compared with something like fracking? I think the government has also talked about fracking and a return to government community pay-outs as a way to incentivise community support for that. John, do you think that renewable energy has the edge in terms of making headway with communities?
Breakell
I think that’s a great point, Ed. I think it could do, but I think it comes back to that shift in narrative, a shift in behaviour from a consumer perspective. The consumer has such an ability to unlock the energy transition. Putting them at the heart of this and getting the consumer to actually drive the change that we need to happen. There’s lots of different facets of that, one being planning, consenting. Do I want a wind farm in my backyard? We’ve got to change hearts and minds in that respect. We’ve got to access the flexibility that’s unlocked.
Matt, you touched on that. I remember a time where my dad would only ever run the dishwasher, the washing machine, and the tumble dryer at night. That was just the rule in our house. You would never run the dishwasher in the day. I feel like we’ve lost some of that. We’ve lost some of the recognition that actually we can play an active role as consumers in the energy system. We can do our part and we can be rewarded for doing that. I feel we need to get back into that debate with the consumer.
The final piece for me is recognising the massive shift that the consumer will need to make in getting to net zero. Whether we’re talking about gas cookers, whether we’re talking about boilers, electric vehicles, actually the shift that we need to make is so fundamental from a lifestyle perspective that it can only be driven by the pull from the consumer. So I feel one element of what you talked about, Ed, was, how do we accelerate generation from a consumer perspective and the acceptability of renewables, but I think that’s only one part of the puzzle. I think there’s a broader campaign we need to go on here to win hearts and minds.
Hastings
Yes. I completely agree with that and it’s difficult, right? It’s really hard. I haven’t seen the latest stats, but certainly before the energy price guarantee was announced, we were talking about a situation where 40% of the UK population could be in fuel poverty. When you’re in fuel poverty and spending more than 10% of your household income on energy, actually sometimes energy is the last thing that you think about. If you’ve got to put food on the table, if you’ve got to pay for school uniforms for your kids… Energy is not the first thing that the vast majority of the population address.
It’s almost thinking about those nudge-style policies and ways in which you can incentivise consumers to actually make those behaviour changes because I’m sure, like many of the people listening, we’ve been involved in energy for a long time and consumers have really struggled historically to engage with energy at a level which is probably required to achieve the kind of changes that we need. I think a lot of that is because again the way that the benefits are allocated to consumers for renewables and other initiatives is slightly out of kilter. It’s a little bit old-school.
So, where I am in Cornwall at the moment, I’m staring out on a five-megawatt solar farm. It must be covering a region of approximately 20 acres plus, I would have thought. Up from that there’s a large wind farm. Driving around Cornwall, you’re confronted with large amounts of wind and solar everywhere you go. Whilst there has been some resistance to that, it’s now, I think, become the norm. What would be really nice is if we could get into a position whereby renewable developers and communities work hand in glove like they have done in a lot of communities over the course of the last 20 years.
For example, I think the first wind farm ever was set up in Delabole in Cornwall, I want to say in the 80s or 90s, certainly a long time ago. We’ve seen companies like Good Energy and Octopus develop much more directly consumer-benefiting business models whereby, sure, we’re going to put a turbine up in your backyard, but you will receive not just a token gesture in terms of, here’s £50, a voucher, or whatever. You actually get 25% off your energy bill and that will really sweeten the deal for you and not just 25% off this year but every year basically in perpetuity. I think if we had those kinds of community-focused business models across all developers, particularly for onshore renewables obviously, then we should start to see that consumer pull like you’re saying, John.
Reed
I think it’s really interesting, isn’t it, to think about the ways in which we can move, as said, from setting out these plans to actually delivering some progress. John, how do we move from the big ambitions to actually putting things into action?
Breakell
What a question with many possible answers. I think we talked a lot about consumer so far. So I think that’s one massive part of the puzzle. I think the second one… If I had to prioritise of where we put our attention and where we focus, I think the second one for me is getting to a flexible network, getting to a flexible energy system that can accommodate all of the things that we want to achieve from a demand side and from a generation perspective. I think what was really interesting actually as part of the 2019 CCC report on climate change was actually the significance of the network being so huge. It is the enabler of everything in the industry. Without the network, we are unable to reap the benefits from offshore wind, from nuclear, and so on and so forth.
But actually, the costs of being able to create a flexible grid are actually relatively small in the grand scheme of things. So, Matt, you talked about scary numbers. We talk about the £54 billion worth of offshore investment to get to an offshore grid that can accommodate our ambitions from an offshore wind perspective, getting to the 120 gigawatts by 2050. Getting to that actually… The 54 billion in the grand scheme of what we need to spend on the energy transition to unlock the savings, to create the energy security, and to get to a fair and affordable system, is actually relatively small. So, for me, my number-two would be getting to a flexible system that accommodates everything we want to achieve.
Hastings
Yes. I completely agree with that around the flexible system. I think again there’s some nuances to this, though. I think talking about the energy network… So, the programme that I look after, the Strategic Innovation Fund… We’re investing £450 million over the course of the current price control, which goes from 21 until 2026. Some of the innovations that we’re seeing there… The networks are doing a lot, but I think one of the challenges is, it’s not just about the technology. It’s about the system processes. It’s as much about the how as it is about the what. So, for example, how do we get into a position where… I think there’s almost been an overreliance on government to be the middle of the wheel, to be the coordinator of the broad system to help us work collaboratively in order to deliver some of these significant changes.
I think one of the big evolutions, revolutions if you like, that we’re starting to see is this acknowledgment that you can’t just solve it in the networks. You can’t just solve it in generators. You can’t just solve it in consumer space, demand side. You can’t solve it with just finance and investment and investors. You can’t solve it with a regulator, and you can’t solve it with organisations like UK Research and Innovation or Innovate UK who are investing to innovate in this space. It needs this whole-team effort, if you like.
I think one of the things we’ve tried to put together to address that is this energy innovation summit which we’ll be launching this year, 28 and 29 September, up in Glasgow. The purpose of the summit really speaks to what you’re talking about there, John, which is, we need a place where the whole sector can convene as one and almost leave our various corporate, company, government, department identities at the door and just work collaboratively on this enormous problem. It’s a bit like COP26 and COP27 where you’re seeing different countries working together to try and address these profound issues. I think we can do a lot more in that space to work collaboratively to deliver.
So I think that is a really big thing that we could consider and I think that creates this environment where you get government departments like BEIS, DfT, DCMS, so the Department of Culture, Media, and Sport, the Department for Transport, the Energy Department, etc., who realistically don’t historically have a great track record of working together. But now the energy system is moulding where digital meets mobility meets energy and there is a great need for government departments to collaborate and even different regulators.
So, we’re seeing this nexus, say, between energy and water, for example. When the energy prices started to rise, the water prices started to rise, people started to realise, crikey, well, actually the amount of electricity required to pump water around the country is absolutely immense and all of these things are linked. So we need organisations like Ofgem to talk to organisations like Ofwat, to talk to organisations like Ofcom, for example. The communications infrastructure required to manage a smart system needs to be exponentially more intelligent than it is now. So I think creating a place where we can all come together not to show off to each other but ultimately to work collaboratively to address some of these challenges is going to be really important.
Reed
I think we’re going to take a short break here, but we’ll be back in just a moment.
Voice-over
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Reed
Fantastic. So, I think it’s some really interesting points that we’ve raised there. Maybe taking it back a step just to look at how we pick energy sources, I think the government seems keen to support offshore but maybe is more sceptical around some of those onshore solar plans, onshore wind, things like that. John, what do you think? Is there a place for government? Is government leading the way? Should companies be standing up more to make the case for one resource over another?
Breakell
Yes, absolutely. I think there’s a huge role for the private sector here to put forward the best possible plan to get to net zero. I think the role of government then is to balance between all of those sources to get to the right answer. I think one of the points that you touched on, Matt, actually was, when we consider energy sources, we tend to frame that and create a way of thinking around that that’s purely energy based. We talk about the trilemma, we talk about vulnerability, we talk about security, and we talk about getting to net zero.
But actually energy is so fundamental to our way of life that when you think about the choice that we’re going to make in that, actually it has impacts all across everything that we do. So it has impacts on jobs. It has impacts on communities around the UK. The government’s role in balancing that perspective, I think, is going to be increasingly critical over the next 10 years to get us to net zero. But to get there we need the private sector to come to the party with the innovations, the technologies to be able to accelerate that agenda.
Hastings
Yes. I think it’s the private sector and the public sector, and the third sector and consumers bringing everything that they’ve got to the table here. Because I think, having worked in a big corporate energy company for a long time… I wouldn’t even say in the boom days of energy but certainly at a period which was slightly less challenging than this. There was innovation, but was it really moving the needle? I think some of the corporates in this space really struggle with a true culture of innovation, one that enables them to be dynamic and responsive and take risks. Ultimately, when you’ve got downward pressures from shareholders, your appetite for risk… It’s understandable that a lot of corporates play it safe. So I think culturally there’s a lot more that we can do across the private sector and more broadly and government is part of that as well.
Going back to what John was saying on the business side of this and also on the consumer side of this, the trilemma itself was almost a negative narrative around, these are all the things we need to be worried about. I feel like there’s a new narrative here which is almost more along the lines of a triple opportunity. It’s possible to do saving consumers’ money and delivering them new products and services to make their lives better and it’s possible to reduce CO2 emissions and support climate change and it’s possible to develop UK economic growth and have a very thriving startup, scale-up, business, corporate community which is exporting its capability globally.
So those three things have been seen as… Maybe if we have to reduce cost for consumers, then we have to reduce investment for businesses. Or if we have to reduce investment for businesses, we’re going to have to reduce some of our CO2 aspirations. I think you can do all of them in the same light in this future, and I think ultimately we have to do all of them in order to move the needle at the speed and scale that we have to.
Reed
And you mentioned innovation there, Matt. How much more do we need to innovate? I feel like, we’ve got offshore, we’ve got big wind turbines, we’ve got solar panels. What do you think companies should be looking at as the next area to focus innovation?
Hastings
Yes. Great question. I think when the CCC first came out with… I think it was Carbon Budget 4 perhaps. They were almost suggesting that innovation isn’t required. We can just get to 40 gigawatts of offshore wind, I think it was at that stage, subsequently raised to 50 gigawatts, with the technologies that we’ve already got. That has proved not to be the case and it’s not the case because currently, if you want to connect anything large-scale into the transmission or distribution network, there is an enormous queue that you need to join prior to actually being able to achieve that connection. So we already hit a major barrier in terms of how we’re going to accelerate to the levels that we need to.
You can solve that barrier, I suppose, in two ways. One is, you just chuck more money at the networks and they can put more copper in the ground and reinforce the network and increase the capacity. Or we can innovate to really look at these non-wired alternatives, as they’re called, and consider a wide variety of different ways to approaching the problem. Or, as is often the case, we do a bit of both. Reinforce the network where we need to but innovate at the same time.
The Strategic Innovation Fund… The way that we work is, we set four annual challenges every year. So last September we had a heat challenge, we had a mobility challenge, we had a data and digitalisation challenge, and we had a whole-system integration challenge. With those challenges, they go through different phases of discovery, alpha, and beta projects. So a discovery project can be two months long. £150,000 is available. They then reapply into an alpha. You can successfully secure £500,000 and do a six-month project. Then they apply again into a beta and, if they’re successful, they can go on to get multimillions and run a project for a number of years.
So that approach encourages a lot of risk-taking especially at the discovery phase. So we might start with, say, 40 projects at discovery. We have then 18 projects at alpha. They’ve just started. Then we might end up with five or so in beta. So the kind of innovations that we’re seeing across those four challenge areas really start to address some of the barriers within the networks and some of the things that need to be done there. Every year we have these annual recurring challenges and round two challenges launch… It’s mid-September at the moment, so they launch in a couple of weeks’ time.
There we’ve got challenges like supporting a just energy transition. We’ve got challenges around the decarbonisation of major demands, so things like heat and transport. We’ve got challenges around risk and resilience, so looking not just at climate impacts but also cybersecurity. Then we have a final challenge of trying to prepare for a net-zero power system by 2035. So without innovation across these different challenge areas, we’re going to hit barriers and blockers that will prevent us from achieving net zero. So that’s just within the networks.
I could also talk a little bit about innovation within the public sector just very quickly. Within days there is a programme called the Net Zero Innovation Portfolio. It’s a £1 billion taxpayer-funded innovation portfolio looking at an awesome range of different aspects of technologies, everything from heat pump ready programme which is looking at how we’re going to get 600,000 heat pumps in homes from almost a standing start by 2028 through to things like their alternative energy market programme, which is looking at new ways of building the energy market to better serve the needs of consumers, businesses, and the planet.
So I think we do need innovation, but there is a but. I do think also we must ensure that we’re coordinating innovation and targeting it in the right areas. That’s where I feel we could improve. So things like setting more responsive challenges on an annual basis across all private-sector and public-sector activity and ensuring we’re not left in that position of saying, right, well, this year our priority is heat and then being stuck with a four-year programme that doesn’t evolve and change. We’ve got to be flexible and responsive when it comes to innovation.
Breakell
What I loved about what you just said, Matt, was how holistic the approach is that you’re taking to innovation. You talked about not just network innovation and pipes and wires, but you talked about market innovation. You talked about the way we interact with consumers. For me, that’s where we can really succeed, is by bringing all of those threads together, making innovation part of how we operate as an industry is so fundamentally important. I think sometimes we fall into the trap of thinking that innovation has to be big, strategic, long-term projects. We talk about nuclear fusion. We talk about massive projects. There is a place for that and there is a need for that, but I love the practicality about what you’ve talked through there.
Reed
Just on that idea around innovation and new ways of doing it, I think obviously there’s a lot of interest and abiding interest in hydrogen as a way to deliver decarbonised energy and I think that feels like that’s maybe more as a vector than a source in itself. But, John, just very quickly on hydrogen, do you see there being a role for hydrogen in delivering this decarbonised energy?
Breakell
Yes, absolutely. I think hydrogen is such an exciting space to be in now. If you think about what we’re trying to achieve, trying to get to net zero by 2050, the role of hydrogen, the role that it could play at a domestic and industrial level is really exciting. For me, the big message here is diversity of energy supply and diversity in the energy mix. There is inherent value for GB in having that diversity of energy mix and actually recognising that value and baking it into how we think about the mix that we need over the next ten or 20 years is really important. But the role of hydrogen in giving us flexibility, giving us options in how we use energy, how we convert energy from one type to another, is going to serve us incredibly well over the next 20 or 30 years. I think it’s so important now that we make a set of strategic choices that keep those doors open for us.
Reed
Matt, you’ve talked about the grid. You’ve talked about that delivery side of things. People are keen on touting hydrogen as one way to deliver, hydrogen, I suppose, domestically among other things. Do you see there being a role?
Hastings
Yes. I think in a 100% renewable energy system with an abundance of electricity where you’ve got a problem with storing that electricity and ultimately using it at a later date, it makes obvious sense to look at the role of green hydrogen as a mechanism for doing that. I think it’s complicated and important to be quite impartial here because there’s a lot of organisations who have got a lot to win from hydrogen and there’s a lot of organisations who have potentially got a lot to lose if hydrogen doesn’t get taken on board. So we just need to make sure that we’re looking at the numbers, we’re not overegging the pudding when it comes to the benefits of hydrogen. It’s certainly something that needs to be explored and we’re doing a lot of that on the Strategic Innovation Fund.
Some of the biggest experts in hydrogen in the company are part of National Grid Gas Transmission, fantastic team there. One of the projects that they’re working on through the Strategic Innovation Fund is looking at things like barrier coatings for gas network assets and looking at the best materials that can be used for internal coatings of pipelines. Because if you put hydrogen in a pipeline, it accelerates the degradation of the existing material. So they’re looking at all sorts of interesting coatings, things like electrodeposited zinc, copper, or nickel that can actually reduce that degradation so that you can actually inject hydrogen into the transmission lines and also into the distribution lines.
So there’s a lot to consider with hydrogen. Is it an opportunity? Definitely. Do we need to keep an eye on it in terms of the numbers? Absolutely. Is it going to be part of the mix in the future? I’m almost sure that it will be, but let’s keep an open mind.
Reed
And I’m sure that we’re going to hear more about hydrogen in the next episode of Net Zero Nudge, which looks at domestic heating and insulation and some of those questions. Just as a final question, I think we’ve talked a lot about some of the costs and the challenges and, I suppose, the need for change, haven’t we? But I suppose looking at the positive side of things, what do you think companies could do, Matt, to seize some of the advantages, some of the opportunities of decarbonised energy?
Hastings
Yes. There’s a huge amount of opportunity on the business side here. I think ultimately I think back to some of those organisations and businesses that invested in renewals back in the feed-in tariff days, so going from 2010 to 2014. At the time I was involved at the [unclear] project. We were looking at the business case for things like large-scale wind and we were involved with a lot of other organisations who were looking at similar investment cases. It was quite hard even with the feed-in tariffs at that stage to make the business case stack up. However, those organisations that made a long-term play, more so on the solar side than on the wind side, are really starting to reap the benefits now.
To think about, I suppose, the business value of receiving renewable energy directly from on-site renewables at essentially zero marginal cost enables you to compete. That ultimately, I think, is the narrative that we want to associate with the energy transition. We want a highly competitive UK economy that is world-leading and in order to compete on a global stage, we’ve really got to reduce the exposure to price rises that a lot of businesses have off the back of their gas connections and non-renewable connections as well. So I think that’s the key thing there, is around economic growth and how we support businesses to seize that advantage.
It’s not just a case of obviously looking at renewables. It’s always energy efficiency which crops up as the wicked problem which has never really been dealt with, let alone in the domestic side, certainly not really on the business side to quite the same extent. We would really like to see businesses, I think, embracing the need for on-site generation as well as energy efficiency, which they have been doing. I think a lot of organisations have moved a very long way over the course of the last decade, but there are still a lot of sectors, SMEs in particular that don’t have the balance sheet of some of the larger businesses, that are possibly a little bit further behind. That does need some government support. I think we do need to support the business community in some areas to really grasp those opportunities.
Breakell
I think that’s a great point, Matt. If I had one call to action for the business community, I think we are on the cusp of a technological energy revolution. I think if we can activate particularly the technology sector to get into the problem of demand-side response, building on local generation, building on energy efficiency, the next wave, I think, is that ability to access flexibility. I think if we can activate the technology sector to be able to solve for that in the way that… Technology has revolutionised the way we live our lives today. If we can get into that space, I think it holds limitless benefits for us.
Hastings
And to bring it back to the consumer, we are seeing this enormous upsurge in digitalisation and the development of new products and services and platforms which are delivering new types of energy services to businesses. I think about this very similar to, say, the role of open banking. Open banking has leveraged billions of pounds’ worth of value to the UK economy. I think the last stat that I saw was, 80% of the startups that were created off the back of open banking are housed in the UK.
If within energy, we can create things like open energy, and we’ve worked with an organisation called Icebreaker One who have created this data-sharing governance machine, if you like, which enables organisations to more effectively share data. I think things like being able to share data across the startup community, across the business community to enable them to build the products and services of the future which will benefit consumers… There’s ways that we can unlock economic growth in no-regrets-type scenarios and I think open data and digitalisation is a massive opportunity there.
For anyone who’s interested in finding a bit more about the Strategic Innovation Fund, please do head over to Spotify and just search Bright Spark, which is our podcast really getting into the weeds of energy network innovation in a bit more detail.
Reed
Well, I think that’s a great place to bring this episode to a close. So listen. Thank you so much, John. Thank you, Matt. I think there were really interesting ideas there. I think we started off by talking about the energy side of things and I think we got more and more into the grid. I think it’s really interesting how that seems to be the critical area for improvement, doesn’t it, and just the opportunities that can be unlocked that will then go on to create new opportunities for others.
Please let us know what you think of some of the ideas we’ve raised here, listeners. You can email outloud@energyvoice.com. If you’d like to be part of the conversation and share your story with the energy industry, you can email outloud@energyvoice.com, too. You may already know that every week the Energy Voice team get together to highlight important stories from the world of energy in our regular podcast episodes. So, if you’re not already, please do follow Energy Voice Out Loud in Apple Podcasts, Spotify, or wherever you get your podcasts to get this free essential briefing every Friday.
This is the second of the five-part Net Zero Nudge. Next up we’ll be talking about insulation and building efficiency, so please keep an ear out for that. For today, I’ve been Ed Reed. Thank you for listening.
