Interview: Nina Skorupska Chief Executive, REA

First published in New Power Report January 2015
The Renewable Energy Association’s broad membership means it can focus on developing an economic renewable energy industry, its chief executive tells Janet Wood.

Nina Skorupska, chief executive of the Renewable Energy Assocation (REA) brings experience from around the energy industry to bear on her role, from managing a fossil fuel station (at Didcot), to trading power, to managing biomass and setting up local energy hubs in the Netherlands. Perhaps that’s why she is a good fit for REA’s “pan-industry” approach to renewable energy. Instead of lobbying for one particular technology or another, the organisation aims to “deliver a sustained business model that is value for money,” and one where “we can demonstrate to the people who are ultimately paying for this out of their energy bills that these are the right choices,” she says.
I ask if that’s a delicate balancing act between renewable sources; she says that the challenge is “not that we represent so many technologies. That’s a fantastic vision. But we need all the government departments to be going in the same direction.”
When we meet, it is the Department of Energy and Climate Change (Decc’s) agenda that is leading, as both the Capacity Market and Contracts for Difference are in the midst of implementation and auctions. I ask her how she assesses electricity market reform at this point. Reminding me that some of the legislation, including finalising the offtaker of last resort arrangements, has still to be worked through – a problem in itself – she says the ground has changed.
“EMR was a great idea, in a framework that has probably now become overly complicated because politics has played its part. If you listen to the original intent it was about creating a mechanism that would definitely give value for money instead of an instrument [the Renewables Obligation] that just gave money … and people got that no matter what the energy price is.”
She traces the need for EMR back to the failure of the EU’s Emissions Trading Scheme (ETS), which “never got the teeth it needed to have to even start contemplating having a technology neutral market.” The price of carbon is not high enough for renewables to compete. Instead, the carbon price is “still languishing in the single digits and it’s just a vehicle that is making lots of money for our carbon traders in London.”
Skorupska says she was “really heartened to hear the secretary of state say as recently as October that we must get to grips around the new version of the EU ETS” but she still has concerns: “let’s see what happens, because everyone is very concerned now with the collapse of the oil prices.”
Although she describes linking oil and gas prices as “old world thinking,” she notes that it links directly to the reference wholesale price that will be used in managing Contracts for Difference. That makes a material difference to the subsidy paid and the amount of renewables that can be supported.
Skorupska says it’s an example of how, when it comes to EMR, “There are a lot of unforeseen circumstances that should have been foreseen in putting this plan together… Talking to my Decc colleagues they will say that will have been taken into account in the modeling and they have enough flex in the Levy Control Framework,” but she is clearly concerned.
Skorupska points out that the industry is still waiting for more information about how the early (FID-enabling) Contracts for Difference were decided. She still believes those contracts were probably required: “everyone has to remember that a year or so ago investors knew a lot less about what the EMR and CfD process was going to be. For those projects I believe we had to do that kind of a step.”  But she adds, “the government should have made it an awful lot more transparent how those decisions on awarding those particular projects came about…. What were those decision points? We don’t know. That makes it difficult to say that was the right thing. It may have been right decision but we can’t substantiate that.”
For REA’s small and medium company members the complexity and sheer administration involved in the EMR process have been a burden. “We have had 18-20 consultations in the rollout. How do independent generators and the smaller companies who want to get their projects away and choose to try to do it within the CfD rather than the RO deal with that?”
At the point of auctions smaller companies hit more disadvantages. She explains: “as well as the cost of development [of auctioning] – the smaller companies don’t have an opportunity to do trading or auction gaming tactics where they can try to pitch in different auction strategies. They may not have a portfolio that can do that.
“And they may only have one shot at it, because the auction is once a year at the moment, so if you are not successful now you have to wait a year. We were arguing that you must address the frequency of these auctions so that people can learn from this. We have made it very clear we must see the learning points from this first round as soon as possible but we are already seeing a delay in this first auction.”
Her own experience has made it clear just how much small companies have to do to catch up with majors: “When I learned to become a trader I practiced for six months before they let me have a go on a real desk. I ran a shadow book. There is nothing shadowy about this.” That’s why the feedback from REA members is that any projects that can be brought in under the Renewables Obligation will avoid the CfD and especially the first, unproven, auction. Skorupska sums up the tone as “Better the devil you know”.
Of course, Skorupska says, “That’s our job as a trade association – to have frequent events with our members … But some can maybe come to one or two only and there is no guarantee you are still at the top of the game.”   She says Decc has done as much as it can to keep companies informed. “You could have a go at the fact that some of the processes they said were going to be electronic and straightforward have become more manual, and almost sending things on paper or by email rather than an automated process – but that’s what happens with most IT rollouts.”
But although she doesn’t question Decc’s commitment to having feedback and wanting to work with industry, she does have concerns about the Department’s over-commitment to its timetable.  “The goal of having it done by a certain date has driven a rapidity of rolling out things, so there has never been a pause to double check – does everything still line up? – and talk to industry again. Most change processes build in a review period before you engage, but nowhere is there that pause moment. The pause should have happened before October, but October was the deadline.”
She says the REA wanted to have learning points from the first CfD auction in March, “but obviously that’s not going to happen. Also it’s a special year: it is very tricky when you are trying to roll out a major change programme in our energy system and you are in the throes of the General Election, to get sensible decision-making.”
Overall, Skorupska says of EMR, “If someone said ‘stop it now’, I would say no. It’s about what you can do after the event, a quick review, quick consultation, then the next auction so someone is not left foundering for a year over a project.” For the long term, the industry needs “the assurance of what will happen beyond 2020 now.  Is everyone going to the trouble of this process” without being sure that there is long term political support and funding for it?  “Investors are looking for that longer term view,” she says.

Biomass: the empty pot?  After having managed the conversion of Tilbury to biomass fuel, and been involved in biomass while working in the Netherlands, Skorupska is a keen supporter of the technology.  She says that coming back to the UK, she rejoined the biomass story half way through the biomass strategy in 2011/12, which  condemned biomass to being a transitional fuel and questioned its sustainability. She says, “I was just aghast.  All industries if done badly are not sustainable. The UK has introduced some of the toughest criteria for meeting that sustainability challenge.” She says opponents have picked the most extreme scenarios and used them to condemn  “a way of delivering a great value, baseload, responsive form of generation to displace coal.”
REA’s role, she says, is to “carry on having the sensible conversation with MPs who think that if they support biomass they could be viewed as being in the camp of that bad description of it. We have to defuse that picture that’s incorrect.
“I would be the first in line to have a go at anyone who didn’t do it well, because I have walked that line from growing the tree in a sustainable forest all the way to having it delivered to my own power station in Holland. I asked the question a long time ago about the sustainability of this and when I came back to the UK it seemed as though I had gone back ten years. When done sustainably this is a great technology to quickly transform our focus from a fossil energy portfolio to a renewable energy portfolio.”
She says the first version of Biomass emissions and counterfactuals (BEAC), which came out from Decc in April 2013, “caused a lot of furore because the RSPB and other groups published that it was ‘dirtier than coal’ based on the extreme option. It caused a lot of damage to the industry that got followed up with a curtailment -  being capped at 400MW  – and not getting FID contracts for dedicated [biomass plants].”
She says the new BEAC report is more balanced, and “Now we have a more pukka report … Now it’s about changing that perception.” She says the REA still champions the “back biomass” campaign and biomass plants are going ahead fuelled with straw, woodchips etc. “What killls those is investor uncertainty around concerns of how much there is in the levy control framework and when various [technologies] take part,” she says.

A new energy market?  One of the attractive aspects of biomass is that it is generally dispatchable and flexible. But when I ask whether the market should reward those attributes more directly Skorupska says there is more to it. “We are excited about how you change the perception that renewable energy is only causing a problem to the industry,” she says, arguing that instead of labeling all renewables sources as intermittent, they should be understood as offering different characteristics to the system.
First, she notes that renewables are changing and can offer more services, and second the nature of the market is changing. “You have smart homes coming, and smart businesses.  Look at role of the aggregators and how they hedge their portfolio.” Wider storage will also have a dramatic effect. REA is looking at what role can it play in storage at may different scales, she says. Lots of companies are looking at large scale flow batteries, compressed air, and other solutions, or at the domestic scale you can “link it to people and PV so they become self-balancers before going onto the grid.”  But to manage that there will have to be changes in both the market and the physical infrastructure. “The model of the market is based on the infrastructure that we have today, not on the infrastructure that we want to see for tomorrow,” she says.
Looking at issues like storage and new market arrangements adds still more to REA’s already extensive portfolio, but Skorupska says she has a model for the organisation: “where do we have to be absolute leaders, where do we have to have good partnership with other working groups and where do we have to have a watching brief to know when to step up.  That’s the smart way to get the best value for our members from limited resources.”
Distributed energy is – finally – the next big thing, she believes. “Everyone has been saying it is coming and I think it’s about to land big time.” She says the clue that it is time to step up engagement is that looking at the generation aggregator market, “more players are coming in now from Denmark, Netherlands and other places.” On the demand side, too, “We have some members already … we will see maybe not the big 60,000 but the big six hundred. There are some exciting models out there”.
She says the role of telling her members where the landscape is going “is invigorating, although it gives me sleepless nights”. With the General Election looming in May I ask whether the political landscape also gives her sleepless nights. She seems to be take that in her stride.
“Last September, just two months into my job, Ed [Milliband] came out and froze energy prices, David Cameron had the green crap statement, everyone was on the barrier for nuclear, and renewable energy was the punching bag. It raised my profile – to be able to go and talk energy common sense,” she says.  But those statements are a danger to the industry: “When politicians swing over to all lining up behind a single technology it really detracts from the long game. It really undermines the confidence in any government that they have a sensible energy strategy that will deliver this low carbon future we are all signed up to, and all the parties had agreed is very important.”
I ask whether it is better to have the public platform provided by debate around energy, even if it has to be in response to misinformation, or to be faced with complete indifference.  Skorupska naturally wants something in between. “Those feisty debates are a good chance to punchily put a key message out there, but it doesn’t take people with you on the journey, it causes a short burst of emotion and a response. People say yes or no, but I want them to say yes consistently, so when you see the vagaries of the oil price collapsing, for example, you don’t suddenly wobble or say go back to doing oil.  We need that groundswell of opinion.”
She says there is a long way to go and new renewable energy targets are needed. Decc’s carbon emissions targets are not enough, she says. “We only have 5% renewables at the moment and a 20% target by 2020. We are saying it should be 30% by 2030, but we can’t seem to persuade the government that we need renewable energy targets explicitly.” Is that target key to taking government and industry on the renewable energy journey? “Absolutely,” says Skorupska, “because what gets measured gets done.”