INTERVIEW: Beverley Gower-Jones, managing partner, Clean Growth Fund

Beverley Gower-Jones Managing Partner CGFBeverley Gower-Jones has a good record in picking innovation. That is why after 15 years at the helm of Carbon Limiting Technologies, which included managing the government’s Energy Entrepreneurs Fund, she is now managing partner at the Clean Growth Fund.

Her task is to raise investment in the fund from the initial £40M – provided jointly by BEIS and CCLA Investment Management – to £100-140M. But most importantly she has to find key innovations where the CGF can make investments that will help the UK decarbonise at scale.

When I ask Gower-Jones about the priorities for innovation it’s no surprise that in the power sector her ‘want list’ is about rolling out more renewables and the scale-upof a flexible system:

“We really need to crack energy storage so we can manage the interrmittency and really understand that.

“We need to get going on demand side response (DSR) and flexible trading and have a really smart system that’s optimised. Now different DSOs are doing small amounts of capacity auctions but there needs to be so much more. The grid is part two-way – but not really – and there needs to be a fully integrated system.

“We are going to need to understand how we are going to use hydrogen in the equation, because that’s the thing that changes electrons to molecules and has a value in that storage and capacity domain – it’s really useful in linking the whole system up and together.”

The fact that Gower-Jones’s initial list has few surprises for most in and around the power sector illustrates the importance of the need to scale up solutions quickly. She says the policy framework is evolving to support that, but “The sooner we can move from DNO to DSO the better” and there are questions to be resolved. The extent to which we can let the market do these things has still to be “unravelled and understood”.

“If we don’t have a system where we can auction supply and demand we are not going to be able to hit our targets”

She notes that power is not an isolated silo any more and its interaction with buildings and transport is where the  biggest changes are needed. “If we don’t have a system where we can auction supply and demand we are not going to be able to hit our targets” for EVs, heat pumps and new routes like vehicle to grid or vehicle to buildings.

I suggest that the barriers between power and adjacent industries such as heat and transport are dissolving. Gower-Jones says there is a “huge mix” coming into CGF. For example, “We see a lot of opportunities in aggregating commercial buildings and offering demand response service”.

 

Who is coming in?

I ask about the mix of innovators she is seeing. Is it power insiders looking for change, or outsiders responding to a more transparent industry?

She says some utility companies have corporate venture companies, but most of the innovation comes from outside, “because it is always harder to change your own world. Someone from an SME or outside sees the opportunity and maybe they don’t quite see the hurdles and they have the energy and enthusiasm that’s required.”

it is always harder to change your own world. Someone from an SME or outside sees the opportunity and maybe they don’t quite see the hurdles

That, and the eventual acquisition of startups by existing players, is typical of most industries, she says. “The thing I see that is different is that a lot of the oil and gas companies are looking to become energy providers  … so I think the competitive threat to some of the incumbents in the power sector is bigger than it has ever been.”

Evolution from vertically integrated companies has created new roles, “ And given that they have a different perspective and a different view I am sure that the conversations will start to change and be different.” The question is  how the regulation and commercial sides start to come together.

She gives the example of an SME that monitors batteries on the grid and wanted to  bid them autonomously into energy markets.  It found that, between the top performing battery and the worst performing “the difference was vast.” But the battery owners did not want an autonomous bidding service, “So they have ended up pivoting their business model to be an information service showing owners just how much money their assets are making.”

Between the top performing battery and the worst performing “the difference was vast”

She says automation will happen in the future, recalling that for demand side response in the short term operating reserve (STOR) market, “They used to have to call the asset manager and say they would like to turn the asset off and they would say yes. When they had built trust they were able to do that automatically.”

 

The door is open

So far over 500 investment options have come through CGT’s door, and Gower-Jones stresses that more are welcome. It represents over £300M of deal flow, “nicely spread across the UK including NI, with a really nice mix of buildings, industry, waste, transport and power. We have seen everything from nature-based solutions and measuring the carbon stored in the soil from regenerative farming to a company that wants to coat semiconductors in space.”

Looking at the areas of action she says that in some there is lots of competition. In batteries there is lots of action across chemistry, management, etc. “it’s a really critical area”.

Electrolysis is the way to create hydrogen –  “I don’t think there is any doubt about that now”

She contrasts that with hydrogen, where she says electrolysis is the way to create it –  “I don’t think there is any doubt about that now” – and innovation is around measurement, standards and all the other aspects you need for a system. Carbon capture, use and storage (CCUS) is different again, with different capture technologies. There she says the question is the use case, whether it is carbon storage or turning it into aggregates or minerals.

“The challenge is that for some of the use cases the fraction is modest, so you are capturing maybe 1or 2% of  carbon…. Scale up is really important.”

 

Calculating the carbon saving

With some technologies on offer that will displace a fossil fuel process directly, and some that are enabling and indirect, on what standards does CGF base its assessment?

Gower-Jones explains, “We go for a bottom up approach, understanding from the SME and a set of assumptions what the carbon saving of a unit of whatever the widget is,  then looking at the cost of the carbon saving for the widget – is it affordable.

“When we understand the per-unit piece we can look at what that looks like in terms of sales volume. As the company grows and accelerates its process and builds out sales and revenue that grows the carbon saving, so we look at the forecasts on the carbon saving and have some internal benchmarks. We get that report independently assessed by an expert and the we either accept it or maybe go back to the company.

“Then you have to look at the whole lifecycle in terms of the noise and the footprint and the resources being used, so we take all that into account.”

A recent report by the Parliamentary Group on Energy Studies suggested replacing a levelised cost of energy, a commonly used metric, with a levelised cost of carbon.

She says that is an interesting idea, “it is going to vary and it will depend on the different sectors we have to displace”.

For example, “We can’t wean ourselves off fossil fuels if we are still reliant on petrochemicals for the chemical sector.  What is a good levelised cost of carbon price for the chemicals sector? That will be different to EVs, or capture and storage.

“Some things are harder than others and it is not obvious what the benchmarks are for things we are trying to displace. Some of the resource efficiency options actually emit more carbon but they save resource. Take plastic – you could pyrolyze it, but plastic is a carbon sink.

“It’s really complicated, sometimes counterintuitive and a lot of pathways analysis.”

 

Growing the investment

Gower-Jones is “determined to have the fund oversubscribed” by October and says “We have a huge amount of interest and a number of serious conversations now with different parties”. She is  very keen that different parties bring different experience in knowledge, access to market and opening other doors for the fund alongside the money. She also needs groups that will sit well alongside government and the other cornerstone investor, CCLA -  “and really be able to contribute to the debate at that level.”

She adds, “We are really trying to waterfall money in and encourage co-investment. … of course anyone who invests in the fund would have early access and sight of the deal flow and if they wanted to co-invest on an investment then they would be very welcome.”

Anyone who invests in the fund would have early access and sight of the deal flow

As for the government investment, “we all see this space as very commercially attractive… they are indicating that by being on the same level playing field as all the other investors in the fund.”

Two investments are already made – in vehicle-to-grid company Indra and response platform Piclo – and she says there will be more before the fund closes. “I wanted to do the first two so that investors in the fund could see the types of deals we want to do and could see that execution capability and the types of co-investors like Gulf Oil that we have brought  in – that’s important.”

The door is always open for more deals, she says, stressing, “It’s always good to come early. If you say you need the money now, it’s more difficult. Start that relationship early so when you do need the money you are known and we have already had a chance to see what you have delivered, over what timescale.“

 

Buildings for a future

Gower-Jones is particularly interested in buildings, saying they can “do more”. Traditionally the owner pays and the tenant gets the advantage and that has always been a blocker, she says. She says that after Covid left commercial buildings emptier than normal for so long, “I am hoping that there will be more incentives for building owners to aggregate their buildings, sensor them up and get them ready to provide demand response. Because that is another revenue stream that a landlord can access and that would be a real link  between the built environment sector and the power sector.”

After Covid left commercial buildings emptier than normal for so long, “I am hoping that there will be more incentives for building owners to aggregate their buildings, sensor them up and get them ready to provide demand response.”

The challenge has always been trying to aggregate enough buildings in the pipeline, “because you can’t finance them one at a time, you have to find a way to package them into finance bundles so you can retrofit finance together.”

She thinks the money is available, because the market opportunity is so big.

As well as owner willingness, and investment to make it stack up economically, “then there is the organisation and arrangement of the portfolio of the buildings and all the stock. The start is to understand what we have got.”

Part of the problem is data and “Knowing what is in your inventory – landlords don’t want to say they don’t have that information, but when you have owned buildings over such a long period with lots of repairs and retrofits, when you walk into it you don’t know exactly what you are going to find.”

I suggest it is an area for open data and she says, “That’ a very interesting observation” especially because some of the landlords are local authorities or social housing.

“We have had so many SMEs with technologies who have been to social landlords and it is impossible in terms of the engagement and takeup.”

Could local authorities take a lead by opening data on their own portfolios? “Absolutely they could. The government have done a lot with their buildings and they have offered them for trials and projects in the past and I think will continue  to do so. But we need a national database on what stock have we got, and when was it built – we won’t have all the answers but first of all we have to look at what we know and what we don’t know.”

She imagines a task force with landlord and local authority representation charged with making our building stock fit for the future in five years: “ What data do we need? What policy intervention do we need?  Then I think we would have a shot, but leaving it up to each individual landlord to figure out what is best for their portfolio is not efficient in terms of best practice sharing, learnings, economies of scale – there is just so much advantage in doing this UK-wide.”

 

Local solutions

That need not necessarily clash with another current agenda – responding to local needs and resources, she says. Making things cost effective is about having some things that are similar, such as product sizes and safety standards – but not everything.

“In terms of distributed energy it’s about what systems work for what locations and what ecosystems. We have some heavy industrial centres, we have some rural areas, for example, each will require a different solution and we will have to figure out what that is. And more critically we will have to work out how we commercialise those different systems. How they are run and operated is going to be different from city to city.”

She asks, “Does it have to be the same in Liverpool as in Wales? In a distributed system will some things be different? I don’t know if that’s such a bad thing. Maybe I am ignorant of the issues but that’s the beauty of innovation from outside.”

Incumbents may have good cause worry about variation, “but maybe it’s one of those carefully put questions”.

She says, “In some ways it is more difficult to break the mindset in a country like the UK with its extensive existing grid. We have to work with the hardware we have here already… We don’t want to lose that, it is really valuable, but we do have to be able to challenge our own mindsets on the ways things should be.”

 

Further reading

INTERVIEW: Sebastiaan van Dort, head of energy at BSI, says standards can underpin a more flexible and inclusive energy sector

INTERVIEW: Stephen Stead, SSE Enterprise, prepares to bid aggregated response into Balancing Market

INTERVIEW: Mark Futyan, Anesco

“Regulators have to continually change”: Views on the future of utility governance by former regulator Regina Finn

 

 

 

1 comment for “INTERVIEW: Beverley Gower-Jones, managing partner, Clean Growth Fund

  1. August 27, 2021 at 8:53 AM

    Beverley says the use case for CCUS is “carbon storage or turning it into aggregates or minerals”. The major use case in my view is fuel. Direct air capture of CO2 and conversion into methanol for powering vehicles using direct methanol fuel cells would provide a closed anthropogenic carbon cycle with only water as the other emission. Carrying hydrogen within a liquid molecule rather than forcing it on its own into extremely high pressures is a more sensible and biomimicking way to carry energy. Chemical storage of energy in fuels provides the highest energy density storage. The volumetric energy density of methanol is over 3x more than H2 at 700 bar. Although there are cost challenges, with enough backing and scale these can be overcome.

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