Is the UK an attractive customer for the global electricity supply chain? It is just one among many countries who are transitioning their electricity sectors from fossil fuels to renewables, and are faced with reconfiguring and expanding networks as a result.
When I talk about this issue with Matthew Knight, head of policy and markets at Siemens Energy, he agrees the UK’s CP2030 transition “is happening against a backdrop where global demand [for grid technology] is growing.” He puts growth at about 18% per year for the last couple of years and says it is likely to be similar for the next couple of years. “So if there was 20% spare in the global supply chain last year, it is all used up this year and it is going to be short next year.” That means, “It is important for the UK to be able to buy in bulk and be attractive to get the bit of the supply chain it needs.”
Other countries have seen this coming. “Two years ago [Dutch and German transmission operator] Tennet signed a ten year deal for HVDC. That really tied up a lot of the resource – so much so, that it caused some offshore wind developers to look at AC rather than DC [connections] just to be able to get access to the supply chain.”

some offshore wind developers look at AC rather than DC [connections] just to be able to get access to the supply chain.

The good news for the UK is that “Generally the confidence of the supply chain in the pipeline of work from the UK is stronger than it has been”. And that is because “for the first time in 35 years, we actually have a plan.”
The government’s ‘Clean Power 2030’ action plan and so-called ‘Mission Control’ provide clarity on direction and a single routemap – a marked change from recent years, when the system operator used a variety of future energy scenarios .
He says “having the really ambitious plan is very helpful. I’ve said for years that the first prerequisite for the supply chain to invest in anything, whether it is training an apprentice or building a new factory, is confidence in a pipeline of work that we have a chance of winning”.
He is hoping for a “bumper” allocation round for new renewables projects this year. But in fact, “What would probably be best for the supply chain is delivery at a steady rate well into the 2030s.”
Without that pacing there is a delivery risk. He notes there are 88 network projects in the current action plan and “the risk is that they all hit the supply chain at the same time. We have moved from a world where we don’t know what is going to happen, to one where we don’t know precisely what is going to happen but we know it is going to be quite a lot and we may not be able to cope with it.”
With the recent Early Procurement Mechanism Ofgem has given network companies the ability to secure equipment earlier, but Knight says the need to expand the workforce is equally challenging: “We can find ways of extending factory capacity, but it is very difficult to train a senior project engineer – you can’t do that overnight”.

We can find ways of extending factory capacity, but it is very difficult to train a senior project engineer – you can’t do that overnight

He says, “We need a comprehensive workforce strategy”. That means ‘selling’ a career in the industry to recruit people, but he adds, “once we have recruited these people we need to train them. We need to invest in more training centres and more training people and n the best way to do that is to do it across the whole industry. One company can’t do this on their own: we can train someone and then they get poached by someone else”.
He adds, “Once we have trained them, we need to set them to work on sites and they will go up a learning curve in the real world. So you need experienced people next to them, and you need to allow extra working hours on sites so people can get up to speed and learn.” Again, that requires a ‘whole industry’ approach – including the regulator, who has to allow for the fact that people on their sites will be training new staff and therefore need extra hours.
He says, “Last year we did about 600,000 hours on site, in two years time we are already forecasting over a million hours. So that’s the scale that our workforce has to grow and it is probably typical of the whole industry. This is not incremental growth, this is doubling or tripling and in particular skills that can be really challenging.” He illustrates the challenge in securing experienced staff: “of the 150 odd people recruited in the grid team in the last year, 46% were from overseas. That’s not because they are cheaper – they are more expensive and it is much harder to bring people in from outside than use local people. But we cannot find local people.”
He adds, “because grid in particular is booming around the world we can’t rely on a stream of people from overseas. We have to grow our own.”

Electricity is first in decarbonisation
Speaking more broadly about Net Zero, Knight says that “It’s an exciting thing, the idea that electricity goes first. Then the offer to the rest of the economy is that you plug in and go green. If we have a 95% decarbonised electricity system, switching your home heating to a heat pump or your driving to an electric vehicle is the obvious thing to decarbonise heat and transport.”
In contrast to his excitement over green electricity, when I ask Knight whether an alternate vector – hydrogen – is past the early ‘hype’ period, he says “I hope so”. He explains: “The fundamental physics of hydrogen remains: it’s never going to be a cheap fuel, so therefore we should use hydrogen for the things where it has real value. The last thing we should be doing with it is burning it for low grade heat, especially not when heat pumps work better.”
He says, “There are a few things that you really need to use hydrogen for. That is replacing it as a chemical, niche particular high-temperature industrial stuff and a bit of transport – but we aren’t talking about road transport, more marine and aviation.”

The fundamental physics of hydrogen remains: it’s never going to be a cheap fuel

He adds, “The big thing we need hydrogen for is storing renewable electricity. Every country is different and its path to clean energy is different. If you are in North Africa or the Middle East, you have reliable solar every day” so with battery storage you can cover green electricity needs. In contrast, the UK’s assets are shallow seas and strong winds “and that means you have to have enough energy stored for the one period in ten years when the wind doesn’t blow for a week”.
Up to now, we had that storage ‘by accident’ from gas reserves in the North Sea. That and our Norwegian supply will soon both be in decline, so “The future of gas supply in this country is going to be increasingly LNG imports. Then you really are relying on other countries around the world being willing to sell it to you, and being able to afford the price that they are prepared to charge you.” Hydrogen from renewables can alleviate that dependence.
This is important in connection with Knight’s view that we are moving to a different energy era. He says that politicians talk about Net Zero as a cost rather than an investment: “they often miss the fact that we have an awful lot that we have to catch up on.” What is more, they compare the future with the past, rather than an alternative future. “The alternative futures for the UK are either a future that is dominated by wind and some energy storage, and clean, or a future that is dominated by importing LNG from whichever country that is prepared to sell it to us that is going to be incredibly expensive and not so secure.”
The danger in making the wrong comparison is, “Unfortunately, while we have greater clarity on direction, we have lost the [political] consensus”. Until recently parties had the same end point in view (ie Net Zero), with discussion over the speed of change. But Reform, for example, takes a different view. So, “there is a different type of risk creeping in, particularly if you are looking at a long term investment. What if the government changed and what would their view be?”
Going back to the current ‘sellers’ market’ for the electricity industry supply chain, he reiterates that uncertainty is costly, because “Confidence gets built over time when stuff happens the way you were expecting and politicians repeat the same things, and it can be damaged overnight”.
Knight can list real-world examples of the need for confidence. He says Siemens Energy has designed and built the world’s first 100% hydrogen turbine, at its Lincoln site but , “We had to take it to France to test it because we couldn’t find a project here to test it”.
He adds, “We signed an agreement with SSE to build the world’s first large scale hydrogen -fuelled plant at Keadby”. For Siemens Energy it means “tens of millions of pounds in investment and upgrading our test facilities”. Ideally it will be built by 2030, which means SSE will probably have to take an investment decision next year. For that to happen the right policy has to be in place to ensure there is a viable business model. It has to be a collaboration between industry, our customers, government and the regulator.

it’s going to happen and no-one ever saved money by slowing a project down

He says that is all very do-able – if confidence is there.
He adds “We can’t do it any faster than this and we shouldn’t do it any slower”. “The energy transition is unstoppable, and looking back on his early days as a project manager, he says the only way option is to go as fast as we can: “it’s going to happen and no-one ever saved money by slowing a project down”.

Whole books have been written on this sporting progress (although fewer on the consistency of our Paralympians), but it boils down to having – and more importantly, developing – the right skills and resources to improve performance across a diverse base, and then enabling athletes to be the “best they can be”.

Paralympian success defies any narrow perception of what a medallist looks like, even though such high performance requires an advanced skill set in a specialist category, and a dedicated network and infrastructure in place to enable them to compete and win.

When it comes to green engineering skills, Britain must achieve a similar advance in the way we deliver energy over the coming decades. Accepting that we’re not looking at a world in which Britain wins a gold medal every year, can we at least be competitive with our peers and ensure that we are among the best at delivering the energy transition, in particular in the way we encourage and adapt the skills of the widest possible pool of people?

Scale of the challenge
At the Energy UK Annual Conference National Energy System Operator (Neso) chief executive Fintan Slye said: “I’m happy to stand here today and say that our analysis says that it is possible to achieve clean power by 2030”. But even Slye acknowledged massive challenges which require unprecedented innovation and speed in technology, regulatory approvals and planning, all of which require specialist skills which are not yet in sufficient supply.

There are three main areas where the UK needs to succeed in developing these skills: getting the right volume and type of green engineers in a changing environment; ensuring they reflect the communities they serve; and acquiring a development mentality. Key to all three is that we open the door to recognise people’s skills, even if they don’t look or behave ‘like an engineer’.

Getting the numbers
National Grid estimates that 400,000 roles will need to be filled over the next 25 years “to build the Net Zero Energy Workforce required.” Of these, 260,000 will be additional (equivalent to approximately 35% of the UK’s current energy workforce) and the remaining 140,000 will replace those who have left work. While around 216,000 workers could potentially transition from the (slowly) shrinking oil and gas sector, this still leaves a shortfall of 200,000 workers who need to be recruited and trained.
The raw numbers can only tell us so much. Sometimes, just a handful of people across Europe will be qualified to do a specialist job on a complex capital project and there is no guarantee that they will want to be based in the relevant parts of the UK for the length of the programme. The competition for these roles is international, and needs exceed the number of skilled candidates.

Meanwhile, the challenge for British companies not delivering national-scale transmission programmes is that they are competing for a limited pool of talent in corporate specialisms such as procurement and data management, as well as engineering and science-related disciplines.

Representing our communities
After re-skilling and recruitment, a second fundamental imbalance emerges; the profile of a typical UK utility’s skilled engineering workforce is not remotely representative of the communities which it serves, be it in gender, ethnicity or neurodiversity.

The workforce continues to lose employees after they have had career breaks. Energy & Utility Skills estimate that more than 75% of women who leave engineering after maternity leave or career breaks want to return, but are put off due to inflexible working hours and practices.

Fixing these issues is a matter of will as much as process, and individual companies are doing what they can. However, across Britain the pattern is a patchwork, rather than a coherent picture.

One of the biggest gains we can make is to open engineering to enable different abilities and approaches, based on a wider range of sensory processing, motor abilities, social (dis)comfort, and focus. Many technical roles simply don’t look the same as they did; for example, the inspection of difficult-to-access pipework can now be a case of guiding AI robots or smaller devices through the system, requiring expertise in remote technology, data management and a different set of motor skills. Thermal and acoustic imaging and LiDAR for scanning and mapping are increasingly supplementing or replacing hands-on techniques.

Neurodiversity can help here. To summarise crudely, ‘neurotypical’ individuals have less variation in their cognitive abilities and skills across different domains. Others have more significant peaks and troughs. Higher performance in some areas and challenges in others is more common in neurodivergent conditions. Supporting neurodiversity can yield benefits for the engineering profession in terms of creative approaches to problems or particular focus on specific project workstreams.

A development mentality

Government and industry must work more closely to attracting new talent and maintain the wealth of talent that it already has – “leaving it to the market” has had its day. Together we need to find a way of championing green engineering skills, not least showing young people both the fun they can have in the profession and its social worth (which research and experience shows is important for Gen Z).

We need to continue applying the “Baker Clause” – stipulating that schools must allow colleges and training providers access to every student in Years 8 to 13 to inform them about approved technical education qualifications and apprenticeships. We also need to innovate to increase the visibility of career paths in technical green skills and improve the appeal of entry-level apprenticeships.

There are promising signs; UCAS now provides an equivalent range of information on technical apprenticeships as it does on full degree programmes, and early outcomes for the new T-level graduates are promising. Utilities have a strong set of community programmes around their projects and can provide positive local platforms for young and diverse skills development through existing volunteering programmes and through engineers’ genuine if widely unrecognised community efforts to preserve the natural environment where they develop infrastructure.

As with Olympic success, attaining a sustainable, secure net zero energy system by 2050 is a mental and cultural challenge as much as it is a technical one. It needs the full force of the new Government to foster the right approach.

Andrew Marsh is an interim corporate communications manager in the utilities and automotive sectors

In Itatiaia, the capybara was king – and so it should be, as the world’s largest living rodent. When Jaguar Land Rover developed land in the mid 2010s for a manufacturing plant in the area, up-state from Rio de Janeiro, it found that preserving the capybara’s natural habitat (in particular local forestry) was dear to the hearts of regional authorities and residents alike. The company expected education and environmental protection to be central to its partnership with the region – and it remains so today – but the capybara was one local element that had to be understood and respected.

The fundamental upgrade of our energy grids across the UK, facilitated by new legislation announced in the King’s Speech (17 July), will require the same willingness to learn about the localities where we develop new networks and upgrade old ones. That will not change with the shift in emphasis towards central infrastructure planning decisions.

Rachel Reeves delivered a speech at the Treasury on the Government’s first full working day (8 July), affirming that decisions on large developments will be taken nationally not locally, giving “priority to energy projects in the system to ensure they make swift progress”. She added: “We will build on the spatial plan for Energy by expanding this to other infrastructure sectors… we will ask the Secretaries of State to prioritise decisions on infrastructure projects that have been unresolved for too long.”

it was inevitable that the new government would have to tackle planning

Given its ambitious carbon reduction targets, it was inevitable that the new government would have to tackle planning, shortening decision timescales and streamlining the consenting process. The Planning and Infrastructure Bill will accelerate the development of significant infrastructure, but it will not reduce the requirement for public engagement by utilities. Quite the opposite.

The key provisions of the bill envisage:
• A Simplified Consent Process for significant infrastructure schemes, “reducing the bureaucratic hurdles that currently delay project approvals”.
• Modernised planning committees to speed up application processing. This is expected to accelerate decision-making and maintain project momentum.
• Reformed Compulsory Purchase compensation, to ensure that compensation to landowners is “fair but not excessive”, balancing the need for development with the rights of property owners.
• More development sites by improving land assembly processes (for example bringing together separately owned parcels of land).
• Funding for nature recovery initiatives, to balance environmental conservation with the need for development.

Quick and effective implementation of all this and more is essential, if the UK is to have a hope of securing grid upgrades for electricity demand that is expected to rise by 50% by the mid 2030s. Add to that a new hydrogen backbone, to be built between major industrial centres, and the imperative to streamline these processes is ever more acute.

The recent track record of major infrastructure planning supports legislative change. Decision-making timelines for Nationally Significant Infrastructure Projects have slowed this decade, with the average Development Consent Order taking more than four years, up from two-and-a-half years in the decade to 2021. Legal challenges have also increased since 2021 (four successful challenges out of 15), swallowing up time as well as reams of actual and virtual paper on expanded impact assessments.

These policy developments should not be a surprise. Labour’s manifesto was clear: “The current planning regime acts as a major brake on economic growth. We will set out new national policy statements, make major projects faster and cheaper by slashing red tape, and build support for developments by ensuring communities directly benefit. We will also update national planning policy to ensure the planning system meets the needs of a modern economy.” Note the point about communities. How do we build widespread support for infrastructure developments, and what are the ingredients for oiling the wheels and providing an effective legitimate, clean and transparent community benefit?

the scale of engagement the industry needs to have with communities over the next decade is unprecedented and daunting

Whatever the new legislation and regulations enabling utilities to deliver projects, the scale of engagement the industry needs to have with communities over the next decade is unprecedented and daunting.

The idea that local protests may be more easily overcome by a central directive also makes it more likely that local residents and business may feel “done to” by national authorities and large corporates. The energy industry and government should strive to avoid this outcome. The National Energy System Operator will deploy its public-facing Regional Energy System Planners (RESPs), which will help by providing a broader canvas for any local engagement that takes place, but RESPs are also embryonic and it is too early to know how they will work with any new planning regime.

In the meantime, while the extensive consultation of a development consent order (DCO) process can be protracted and painful, it does steer developers into a full and genuine engagement with affected communities and other planning participants. When it comes to regional or national scale infrastructure, development and construction directors shoud profit from retaining the best of the process, albeit streamlined. The discipline and method is systematic and sound, even if all the formal steps prove to be unnecessary.

The engagement and support flowing from a thorough approach is also helpful in ensuring regulatory funding; it was partly widespread support through a DCO that was instrumental in (then) National Grid Gas Transmission gaining approval to complete the Feeder 9 transmission tunnel underneath the Humber estuary in 2020, after a negative initial ‘minded to’ position by Ofgem. Two years later, the tunnel was transporting a third of Britain’s gas as part of the massive effort to secure European gas security following Russia’s invasion of Ukraine.

National security aside, ultimately planning is about people. If we do not take enough time to involve customers and communities meaningfully and consistently (especially on the most difficult material issues) they will be reluctant to listen to us when we need acknowledgement or acceptance of the work that we intend to do. As an industry, we have the privilege of being permitted to develop important infrastructure in their neighbourhoods, and thereby make a massive contribution to UK society and its economy. We must remember to take care of the capybaras as well as the capital.

Andrew Marsh is an interim corporate communications manager in the utilities and automotive sectors.

The NS&I Act seeks to balance the desire to promote the UK’s attractiveness to investors, especially foreign direct investment post Brexit, with the need to protect national security.
The NS&I Act will replace parts of the Enterprise Act 2002 (the Enterprise Act) under which the government was able to intervene in transactions that threatened national security on public interest grounds, if they fell within the UK or EU merger control rules.
Although the NS&I Act will apply to both domestic and foreign investors, the increased scrutiny of investments in the 17 mandatory notification sectors (of which energy is one) comes at a time when other countries around the world are tightening their foreign direct investment screening regimes. The government’s expectation is that up to 1,800 transactions a year may be reviewed by the Investment Security Unit (ISU) (the unit within the Department for Business, Energy and Industrial Strategy responsible for approving transactions under the NS&I Act) a significant increase from the number of interventions under the current Enterprise Act regime.

Impact on energy investments
Energy is one of the 17 sensitive sectors of the economy listed in the Regulations that accompany the NS&I Act (National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021 No. 1264). If the target of an investment is a large new or existing oil or gas production, processing, import or export facility or holds an electricity transmission, distribution, interconnector or generation licence, it will fall within the scope of the new regime.
There are size thresholds. For investors in small to medium-sized power projects (which is a very active space for renewables and battery storage in the UK) it is worth noting that the new regime will only apply to owners or operators of individual assets with a total installed capacity of 100MW or more and those with an overall capacity of 1GW or more.
The NS&I Act is primarily targeted at acquisitions of qualifying entities or assets but it could have implications for financing, especially secured lending transactions such as project finance. Funders and borrowers will need to carry out analysis of their security package (including security over shares and key contracts) to manage the risk of enforcement triggering a breach of the NS&I Act provisions relating to notification.

Obtaining approval
The NS&I Act contains both a mandatory notification regime and a voluntary notification regime. It also grants the secretary of state for Business, Energy and Industrial Strategy (the SoS) the power to call-in a transaction for review if they reasonably suspect that a change of control (which could include the acquisition of ‘material influence’) over a target may give rise to a national security risk. The NS&I Act has some retrospective effect in that the secretary of state may call-in transactions for review that completed on or after 12 November 2020 (being the day on which the bill was introduced to Parliament), subject to time limits of up to 5 years from completion, after 4 January 2022.
Under the mandatory notification regime, a potential investor must notify the ISU before they acquire an interest (which may be as low as a shareholding of 25%) or increase their interest in a qualifying entity or asset (as set out in the Regulations).
An investor may make a voluntary notification to the ISU before it acquires or increases its interest in an entity or asset outside of the 17 sensitive sectors in order to obtain approval for the transaction and avoid the risk of a transaction being called-in by the SoS.
The SoS is able to make an interim order or a final order under the NS&I Act to prevent or prescribe aspects of a proposed transaction if a risk to national security would arise from it or otherwise approve the transaction.

Repercussions for unapproved transactions
Breach of the NS&I Act may result in criminal and civil sanctions. It is a criminal offence for an investor to complete an acquisition that is subject to the mandatory notification regime without approval from the SoS, unless they have a reasonable excuse. Failure to notify the ISU of a transaction that falls within the mandatory notification regime will result in that transaction being deemed void. An investor may apply to the SoS for a validation notice in relation to such a transaction which, if it is granted, will mean the transaction is approved by the SoS and not void. Breaches of the NS&I Act may also result in imprisonment of up to 5 years and fines of the higher of 5% of total worldwide turnover of the investing business or £10 million.

The electric vehicle (EV) revolution is finally upon us. EVs are now a common sight throughout the UK and this is reflected in the sales figures, with around 15% of new cars now being electric.
This shift cannot come soon enough, as transport is the most polluting sector in the UK – accounting for 27% of our total greenhouse gas emissions and hampering our ability to meet our net zero target in 2050.
The government has banned the sale of new petrol and diesel cars by 2030, and sceptics have warned of the impact this could have on the electricity grid, as drivers plug in their cars to charge at home and on the road. Here at Piclo, we have found the opposite: that the significant increase in EVs can support the grid at a local level by providing the essential flexibility to match the peaks and troughs of renewable energy supply.
Energy flexibility enables us to adapt to the fluctuating needs of the grid as well as providing power at a local level – ensuring security of supply and keeping the lights on.
As our energy system becomes greener and we shift away from fossil generation, the role of flexibility becomes more significant, as we will become more reliant on the variable levels of solar and wind generation.
According to recent estimates by OpenEnergi, EVs have huge potential to offer the flexibility required to enable this transition, and could provide over 11GW of flexible capacity to the UK’s energy system by 2030.
We need to shift perceptions, to view EVs as an opportunity to ensure a cost effective transition by providing the flexibility needed to alleviate the strains on our energy grids.

Enabling local energy flexibility with EVs
Smart charging is crucial to enable us to utilise EVs for flexibility, as it ensures that EVs are only drawing from the grid at times when there is low demand or surplus generation. That way, EVs are not putting strain on the grid by charging during times of low generation or high demand.
By doing this, EVs can assist regional network operators with real-time balancing and support growing levels of clean-technologies connect to the grid at a local level.
Piclo Flex is an independent marketplace for trading energy flexibility online, where flexibility providers can transact directly with system operators to provide flexibility. Our recent competitions demonstrate the value of EVs: 68% of successful bids in local markets have been from flex providers that bid with EVs. (See Piclo Flex historic bidding data here)
UKPN’s most recent tender awarded contracts for flexibility via Piclo Flex worth £30 million to innovators in the energy sector, and more than two thirds of the new capacity – 248 MW – will come from smart charging electric vehicles.
In order to ensure the continued rise of clean transport on our roads and clean-tech flexibility on our energy grids, barriers to participating in flexibility markets need to be removed.
These include removing the restrictions on the ability to stack revenues across flexibility markets and continuing industry efforts to standardise participation across DSO flexibility markets. Making these small changes will help to support the flexibility revolution that we have already started in the UK.

The future of the flex market
The UK’s flexibility market has shown incredible growth so far in 2021, as 1.6GW of flexibility has been contracted by DSOs to date. This is great news for net zero.
Recent growth has been driven in part by the fact that some flexibility contracts are assigned in advance and once awarded, can last up to seven years. This has meant that planned EV fleets can incorporate revenues from flexibility into their long term business models, particularly targeting areas where network constraints are present.
There is significant optimism in the UK that this growth can continue, following the government’s recently released Smart Systems and Flexibility Plan, which indicated that 13GW of flexibility could be provided to the system by 2030. To make this a reality, it is important to introduce greater standardisation in procuring flexibility, to simplify the process, improve access to participation and support real innovation in renewable energy and clean technologies.
Given that the market is still fairly young, the industry should combine that standardisation with the ‘learning by doing’ approach that has contributed to the recent growth in flexibility markets. For example, combining EV smart charging with flexibility markets can provide DSOs with more options for effective grid management, optimising the safe delivery of power to EVs without compromising on delivering electricity to offices and homes.

Jump start
EVs have the potential to play an important role in the future of our power systems helping to balance the electricity network: helping to balance the electricity network by absorbing energy during periods of oversupply and to reduce demand during periods of undersupply. So the growth in smart-charging electric vehicles could be transformative for our energy grid.
Removing barriers for EV flexibility providers to participate in the industry is vital, and will play a major role in supporting the UK in its aim to reach net zero by 2050.
The impact of that will be a more flexible energy grid, able to support the continued growth in renewable energy at a local and national level, and a cleaner car fleet to reduce air pollution in our cities. It truly is a win-win

There is a lot of effort being devoted to dragging the staid and traditional energy industry into the modern digital world. The British government has recently re-launched the Energy Data Taskforce, is working with the British Standards Institute on introducing smart standards for appliances, and is expected to shortly publish an updated ‘smart energy systems strategy’ accompanied by an ‘energy digitalisation strategy’. The European Commission is also considering these issues and is planning to publish a communication on energy system digitalisation next year. Alongside this policy agenda, companies such as Octopus Energy are already offering consumers energy tariffs which promise cheaper prices in return for remote control of appliances such as electric vehicle chargers.
Much of this effort is driven by a simple narrative. Decarbonisation of the energy system will be largely achieved by ensuring electricity is produced from renewable wind and solar facilities. Whilst these are cheap and can be deployed at scale, their output is variable and depends on weather conditions. Also, electric vehicles and electric heating will introduce significant new demands for electricity. Balancing production with consumer needs can only happen if electricity demand can be remotely controlled. This requires electrical devices to be digitally enabled and the development of artificial intelligence systems to deliver tens or hundreds of millions of control instructions to these devices.
However, the story is more complicated than this.
Firstly, time is not on our side. Reducing emissions in line with the net zero target and statutory carbon budgets requires the electricity system to be decarbonised by the mid-2030s. We do not have all the live data that sets out the current grid status, which is necessary to identify the need for demand adjustment. Developing and implementing markets that accurately value and reward demand adjustment at different locations is even further away. There is not enough time for these changes to be made and the resulting price signals to drive consumer adoption of smart devices. In any case, it is far from clear that politicians would accept the potential impact of volatile local energy prices on those unable or unwilling to take advantage of the new technology.
Secondly, the digital agenda has not been unconditionally embraced by the public. Whilst there are those who are excited by the empowerment, social innovation, and economic growth that digitalisation can deliver, many others are concerned by loss of privacy, threats to security, and the spectre of ‘big brother’. Although 2.5 million UK consumers and businesses now use open banking-enabled products to manage their finances, this leaves many more who do not. It is difficult to imagine any government riding roughshod over these concerns by mandating individuals to participate directly in the brave new world of digital energy.
The conclusion is clear. We cannot wait for a large proportion of energy demand to be digitalised before decarbonising the electricity system. However, digitalisation and artificial intelligence still have vital roles to play. A dynamic and highly flexible system will be essential. Fortunately, there are a range of large energy storage technologies, such as batteries, water reservoirs and turbines powered by renewably produced gases, that can be used to balance the grid. These must be deployed with the same urgency applied to the wind and solar facilities that they will complement. Digital technologies and artificial intelligence will have a huge impact in improving the operation of the grid as well as the large power generators, storage systems and industrial loads that are connected.
Digitalisation of individual consumer devices should fulfil a different requirement. Instead of an imperative to control as much electricity demand as possible, attention should turn to how digital technologies can improve the consumer experience and encourage rapid deployment of electric vehicles, heat pumps and measures to improve the energy efficiency of buildings. Whilst this is still likely to yield significant demand response, it would not be the primary objective. Reducing energy consumers’ use of fossil fuels, especially gas heating, is a huge task and the power of digital technologies must be enlisted to help address this challenge. The central policy challenge is to decide how to change the way that choices are presented to consumers to support this objective.
Digitalisation and climate are two dominant political issues of our time. There is much to be gained from identifying the sweet spot of mutual reinforcement. Digitalisation can massively improve the efficiency and effectiveness of industrial operations and efforts should continue to exploit these opportunities. However, the biggest win will be in aligning these agendas to improve people’s lives and this requires new policy thinking.
Dynamic, customer-focused innovation must be unleashed, not to deploy digital technologies for their own sake, but to directly support the transition of individual energy consumers away from using fossil fuels. By ensuring digitalisation is part of a coherent overall policy package that helps improve the lives of energy consumers and build a sense of ownership of the transition, emissions will reduce and public trust in these new technologies will improve.

The International Energy Agency (IEA) says that Covid-19 is ‘hurting – but not halting – global renewable energy growth’ and renewable technology costs are continuing to decline. The resilience, adaptive capacity and forecasted growth of renewables needs to be harnessed and utilised to drive global emissions down to net zero.  But matching variable renewables with variable demand  calls for a more flexible energy system. Luckily, some solutions are already available and in common use.

In its Sixth Carbon Budget the Committee on Climate Change stated that, “the shift to electrification and heat networks can also deliver improved energy security and improved air quality”.

Heat networks allow a range of low-carbon heat sources to be used individually, or in combination in a single network. Thermal energy storage can be used to help match supply to demand, improving their efficiency and flexibility. They are technology agnostic, but are increasingly being supplied by heat pumps which provide an efficient way of heating multiple homes with renewable electricity.

Heat network flexibility can be obtained, amongst other methods, by integrating thermal energy storage in district heating systems. This allows a scheme to take advantage of periods of high availability (and low cost) of renewable energy, by using morepower to store extra heat . The scheme can reducepower demand and rely on stored heat when renewable energy is scarce or more expensive, and may earn extra income from grid services.

By supporting the grid at scale, a heat network can help in a way that single heat pumps cannot. Centrally located, thermal energy storage can provide value to district heat systems.

Energy flexibility in thermal networks can be offered by many sources, ranging from dedicated storage systems (e.g. tanks and aquifers), to the thermal energy storage inherently present in the network, building thermal inertia and network pipes containing warm water.In some countries, the majority of district heating systems have controllable thermal storage tanks.

There is a growing interest, both in Europe and China, for the use of short-term storage in district heating to provide flexibility, particularly in the form of ancillary services to the electricity grid, but implementations of these techniques are rare.

The recent announcement from the Climate Change Committee (CCC) of its Sixth Carbon Budget highlights the opportunity for heat network development. The sector will have to embrace demand side response and flexibility. A number of heat networks applying for Heat Networks Investment Project (HNIP) funding are incorporating thermal storage and mechanisms to support a more flexible energy system as we transition towards net zero.

In the UK the potential for flexibility from district heating has not yet been fully exploited but it is more common elsewhere -  for example, in Sweden as much as 64 % of heat network capacity is available for flexibility services.

New developers need to know that flexible heat projects can be viable and economic. We would like to hear about  case studies and projects that demonstrate the principle at work, to add to our examples.  With the help of New Power we hope to build a library of examples and make them more visible, to help put heat flexibility on the menu for all new developments.

Further reading

Enfield residents to get low-carbon district heat from waste

Waste to energy – can it do more for local power grids?

National Grid Net Zero scenarios raise the question: gas or no gas?

Development consent granted for ‘energy park’

‘Significant and immediate’ low-carbon housing need prompts L&G stake in Kensa Group

The government’s commitment to achieve Net Zero CO2 by 2050 is likely to become more prominent post the Coronavirus lockdown. If the country falls below the projected track towards that target, extra effort (ie extra cost) will be needed in later years to recover lost ground. Covid 19 threatens to lose us ground in the immediate future and without short term action there could be long term consequences.

We are perhaps fortunate in the energy industry that our low-carbon target has widespread public support and organisations like Extinction Rebellion will ensure that the government of the day will be held to account for any slippage in progress towards net zero. However, to achieve net zero we need product innovation and widespread adoption of new technology arising from innovation. History demonstrates that adoption of new technology is ensured if the product is progressive and provides user benefits (either cost savings and/or enhanced features). This applies to all sectors from mobile phones to electric vehicles and heating.

Innovation is therefore the catalyst for adoption of products which give the desired result, in this case the desired result being lower CO2 leading towards net zero. Hence innovation is needed to unlock the potential for progressive change. For innovation in a commercial environment, read Research and Development (R&D).

How to encourage R&D

R&D can be privately driven by individual companies or legislated for via government funding, government backed schemes or universities.  The large scale, high profile infrastructure projects should continue to be driven by these initiatives on a national basis, but there is a massive underlying R&D capability in private companies large and small, and in my opinion, much of this activity is under the radar, and under threat.

Whilst the survival of multinationals and large corporations can more or less be guaranteed, in one form or another (someone has to keep the lights on), most product manufacturers need to make a profit to survive – by selling products. Without new products there will be no advancement in technology and little progress towards net zero, so R&D is essential to drive this process.

Unfortunately, upon returning from lockdown, most manufacturing businesses are short of cash after several months of low sales. They need to sell product to raise cash, and they need to manufacture products before they can sell them. They need cash to purchase components and materials, cash to pay for the manufacturing process and cash to administer the sales. The R&D department also needs cash to function, but given immediate priorities for survival, R&D is likely to be last in the queue and may find that there is no cash left!

In a company struggling to recover from the effects of lockdown, thoughts of R&D will lag

Quite apart from the cash situation, in a company struggling to recover from the effects of lockdown, thoughts of R&D will lag behind other considerations. There is no point in developing products for next year and beyond if the company is not likely to survive the next few months. In some cases, R&D costs are being minimised by leaving R&D staff on furlough until circumstances improve, and in other cases, R&D staff are being re-deployed to effect engineering changes rather than innovation. Covid 19 has exposed weaknesses in some supply chains and this is threatening production supplies. Some manufacturers are looking at dual sourcing components to improve continuity of supply, others are seeking suppliers closer to home to get a better control of supplies, whist others are seeking suppliers from the Far East in an attempt to drive down costs. Each of these activities requires design, development, and testing but not research or innovation. Generally speaking, the highflyers in R&D are motivated by research and innovation rather than routine supply chain optimisation, even if the latter is of more immediate benefit to their employers.

Whilst short term redeployment makes good business sense, as a nation we must be aware that stagnation in innovation is dangerous in all but the short term. If R&D programmes are resumed in a few weeks the long term effect of Covid 19 on climate change will be minimal, but if companies decide that having managed without an active R&D department for several months and needing to squeeze their budget that innovation is an unaffordable luxury, many of those furloughed or redeployed engineers (and especially the high flyers) could find themselves unexpectedly on the jobs market and competing with many others in a similar position.

To prevent this occurrence, we need industry leaders (supported by government and the banks) to hold their nerve and invest in innovation to secure their long-term future, and the countries net zero aspirations.

Stagnation in innovation is dangerous in all but the short term

Government clearly has a co-ordinating and influential role to play. It is not my place to lobby government, although it is the objective of the PGES (Parliamentary Group for Energy Studies ) of which I am privileged to be a member, ‘to advise the government of the day on the energy issues of the day’ and during a recent meeting it was agreed that R&D has to be encouraged in all areas of the energy industry if we are to maintain course for net zero.

How to move quickly

There are many ways where the government actively supports R&D including Innovate UK, the Energy Systems Catapult and numerous grant opportunities channelled through the Local Enterprise Partnerships and universities. However, these usually require a lot of administration, verification checks and bureaucracy which often deters all but the most committed businesses. In many cases, success is dependent upon how well the application is completed, rather than the technical merits of the project being proposed.

In my opinion the best and most easily administered funding is the government’s R&D Tax Relief scheme. This is open to all, is non-discriminatory and has well defined rules regarding what qualifies as R&D and what can be claimed. If there is a drawback this is because it is historical – cash has to be spent before it can be reclaimed – but this is normal  practice for most grant schemes. However, the R&D Tax Relief scheme has the benefit that year on year funding can be carried forward to contribute towards next year’s R&D, so the retrospective effect is only experienced once. Indeed, this blow can be softened because a company can claim for two years previous R&D investment upon its first application and if it is loss making the company can claim a cash refund.

The current R&D Tax Relief scheme allows a further 130% tax relief (on top of the 100% normal deduction) on qualifying R&D expenditure for SME’s and a tax credit of 13% on qualifying R&D expenditure for large companies.  It would seem logical to suggest that these rigid percentages could easily be adapted for different types of R&D project. For example, if the government agree that R&D aligned with CO2 reduction is of more value to society than other forms of R&D, it could legislate that the tax relief uplift for qualifying expenditure can be doubled (or trebled?).

If the government was to adopt this suggestion there would be no additional paperwork for companies to complete (just a different multiplication factor), no more admin for HMRC, and no need for finance administrators to vet any applications or process any checks. HMRC have a perfectly good structure in place for monitoring corporation tax and this would be effortlessly absorbed within it at no extra cost (other than the additional tax relief of course, which would be so valuable to the companies needing it).

This is just one suggestion for ensuring that companies prioritise and can afford to justify R&D investment in our industry. Other suggestions are available, but the underlying need is to help companies invest in long term R&D to ensure we support future generations by protecting the environment and avoiding climate change.

First published in the July 2020 issue of New Power Report

Further reading

BEIS seeks input: Alok Sharma MP calls for ‘ideas and insights’ on green recovery

European Scrutiny Committee: government failure to explain future links with EU’s Horizon and power connections initiatives is ‘deeply worrying’

Secretary of state to chair discussions on industrial recovery

Clean Growth Fund seeks to invest £100M in low-carbon ventures

UKERC opens £1 million funding Call for Proposals on green energy governance, finance and cooling research

There is no doubt that from a climate change perspective, the headlines contained in the Scottish budget make encouraging reading. A total low carbon capital investment of around £1.8 billion certainly has a ring to it, as does the £220 million fresh seed money for the SNIB to drive the net-zero transition and the new and expanded schemes to decarbonise heat, transport and agriculture. There’s also an important commitment to the Circular Economy Bill, which is a welcome step.

The £120 million Heat Transition Deal is particularly welcome, given how far heat lags behind electricity in the decarbonisation journey. While £120 million is not likely to be anywhere close to what is necessary – and many would argue that policies around gas in the heating mix need to change to complement any such direct financial investment – the reality is that funding is needed if we are to see renewable heat have the impact it must if we’re to achieve the targets set by the government. Much will depend on how that funding is deployed and the design of any support scheme will be critical. One only has to look at the Renewable Heat Incentive Scheme (RHI) to see how flawed design in financial support schemes can fail to inspire deployment at targeted levels.

And that, I suppose, is the wider theme. The headlines are what they are, but as ever, we are encouraged to be tantalised by big numbers when everything hangs just as much (if not more) on how those numbers break down and how they will actually be utilised to make an impact.

We are told that the Scottish government wants to ‘deliver, via the Energy Investment Fund, flexible investment and debt funding for low carbon energy projects’. How much will this be? In the year to 31 March 2020, it has only been £20 million. It also wants to ‘continue to invest in offshore and onshore wind, hydro, wave and tidal’ – but how and by when?

Separately, whether or not you agree with the funds allocated, or that there is or isn’t sufficient detail provided around deployment, many of the commitments seem to be ones which need to be completed in order to work out how that deployment is best effected. The Climate Change Plan needs updating to show how Holyrood intends to ‘meet the new, more ambitious targets set in the Climate Change (Emissions Reductions Targets) (Scotland) Act 2019’. A net-zero transition strategy also needs to be developed as part of the Green New Deal to “mobilise billions of investment”, and the National Transport Strategy delivery plan needs to be published. The list continues.

With the COP26 in Glasgow just around the corner, Scotland will want to make a splash not only with its climate change policies, but also with detail on how it’s going to implement them. I, like many others I’m sure, have my fingers crossed that it can deliver.

First published in the March 2020 issue of New Power Report

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