Making heat ‘cool’

Professor Jim Skea CBE EI President

Professor Jim Skea CBE
EI President

Energy decision-making is widely varied. There are mega-decisions about nuclear reactors, gigawatt-scale offshore wind farms and interconnectors that criss-cross the North Sea. Then there are the literally millions of decisions, each modest in itself, which collectively shape energy needs and markets. Policymakers and headline writers love the big stuff. Nevertheless, it is the more humble things which will shape out the energy future and which really challenge policymakers.

“Heat” has become a catch-all term to describe all forms of energy use that are not electricity and not transport – and that’s a very large share of energy demand. There is a tendency to describe heat as a “sector”. Winston Churchill once famously said that India was no more a country than the equator was. Well India is certainly a country now but, in my view, heat is no more a sector than a kettle of boiling water is. And talking about heat markets is also bizarre. There may be some district heating schemes where heat is priced and traded but, for the moment, heat largely stays within the premises where it is generated and used.

It is also odd that the energy labelled “heat” in commercial buildings is more often used to keep us cool. Hence, the not entirely facetious title of this blog – we could really do with a catchy term, which covers the energy needed to keep us comfortable, whether it involves nudging temperatures up or down. “Heat” makes it sound as though policy is all DECC’s job. Something round “buildings” or “built environment” would make it clear that other government departments, notably Communities and Local Government who look after building standards have a rather important role to play.  Suggestions welcome!

One of the consequences of regarding heat as a sector on par with real sectors, such as electricity, is the temptation to mimic policy mechanisms that work well where there are functioning markets, c.f. the complexity of the Green Deal. Smaller consumers do not make decisions with the same degree of sophistication as finance officers in major utility companies – and nor should they. If we want to promote energy efficiency and renewable heat then simple, understandable rules and incentives are needed. I was talking to a Swede yesterday who pointed out that Scandinavians value simplicity in all things from furniture design to energy policy. They look with bemusement at the elaborate mechanisms that the UK uses to shape electricity markets and energy consumption patterns.

So where does this rather grumpy rant take us? First, I think we need a holistic approach to keeping people comfortable in indoor environments. It is basically about minimising energy use and maximising inputs from environmentally sustainable energy sources. Second, a joined-up vision of where we are going would help. Top-down views of UK low carbon energy futures suggest a big role for heat pumps for example – but it is fair to say many energy professionals remain sceptical.  Every time an old boiler is replaced by a modern combi boiler we lose the hot water tank – the cheapest form of energy storage for buildings – that would be needed to get heat pumps installed. Are we locking ourselves out of a low carbon future in the longer-term for more incremental gains in the short term? Finally, we need rules and incentives that match the needs of households and businesses and the way they make decisions. When DECC presses control-alt-delete on energy policy after the Spending Review is concluded, let’s hope “heat” is one of the areas that gets the attention it deserves.

The Heat Conference will be held on 25 November in London and is organised by the Association for Decentralised Energy and the Energy Institute.

Restless disposition in energy policy

Ian Marchant

Ian Marchant FEI Immediate Past President

In preparing for a conference on energy policy, I came across this quote from Walter Bagehot – ‘If you keep altering your house, it is a sign either that you have a bad house, or that you have an excessively restless disposition – there is something wrong somewhere’. As a constitutional expert, he was talking about the problems of Government in the 1800s but his comment is so true today.

It was the phrase ‘restless disposition’ that caught my eye, as it is theme that Professor Anthony King uses in his book, Who governs Britain, to describe one of the problems with 21st century politics.  All new ministers want to make an impact; want to be seen to be doing things; want to make announcements that attract headlines. They are always in a hurry.

Energy policy has been a notable victim of this syndrome. This century we have already had nine ministers with cabinet responsibility for energy (counting both DECC and the various forerunners to the Department for Business). It’s even worse at Minister of State level where we are on number 14.  All this change means that the new minister, who arrives with a restless disposition, is also in a tearing hurry as they only have one to two years to make their impact; less time than it takes to build any assets in the energy industry. This timescale precludes thoughtful consideration, proper consultation and assessment of the impact of any change on the whole energy system before action, and completely rules out any learning from the results of previous activity.

The civil service used to act as the brakeman to the ministerial bobsleigh but senior officials change almost as often as ministers and rarely build up expertise in one policy area, seeming to need to switch departments to get promotion. It is no wonder that we have such a patchwork of interventions and plethora of changes and amendments and no wonder that we do not have a joined up, robust energy policy. We are getting what the politicos system is designed to produce – ‘something wrong’ to quote Bagehot.

And EI members agree with me. The EI’s inaugural Energy Barometer  survey reports that EI members see policy continuity as an essential component to reduce investment risk and encourage a longer-term view.  In fact, EI members deem it to be one of the biggest challenges facing the energy industry in 2015. The complexities of the energy system require clearly communicated policies that are consistent over time and with each other.

If we are to have a thought through, robust and enduring energy policy we need a fundamental change to the governance and political arrangements that determine this policy. The stability, longevity and independence of the Governor of the Bank of England is the sort of role we need. And no; I am definitely not interested in doing that job!

 

The Government’s first 100 days (…or thereabouts)

Professor Jim Skea CBE EI President

Professor Jim Skea CBE
EI President

Well, 125 days on my reckoning but the EI  is only slowly instilling some discipline into its new President.

Looking back at the Energy Barometer, which we published just after the UK General Election, the strongest message from EI Fellows and Members was the call for policy clarity. We’ve had a rapid sequence of announcements on renewables and energy efficiency since May, each of which is clear enough on its own. But taken together, the package has left a deepened sense of uncertainty about where things are going.  As I argued in a piece in the ENDS Report, we need a high-level clarification of what energy policy is trying to achieve. How are the three strands of energy policy – climate, affordability and security – woven together in the Government’s view?

The policy landscape had certainly become unnecessarily cluttered. Geological layers of policies that overlap, interact and contradict have accumulated. A spring cleaning of the policy cupboard is overdue, and some of the recent announcements make eminent sense in terms of good governance. Strictly zero-carbon homes are a mirage if realised through offsite “affordable solutions” that could have been better procured by other means (but don’t throw away the baby with the bathwater by weakening efficiency requirements!). Few will lament the passing of the financial model that underpinned the Green Deal. But there is a sense of confusion as to whether the Government is pursuing “better regulation” or rolling back the low-carbon agenda, the latter conclusion being the one that many may draw. Meanwhile, away from the domestic energy policy scene, the Government remains upbeat about its ambitions for this year’s Paris climate conference.

Perhaps the clearest message since May has been the unambiguous support for shale gas. Unfortunately, central government and local government are not singing from the same hymn-sheet, as Lancashire County Council demonstrated when they rejected Cuadrilla’s planning applications in June. Whatever central government says, this creates uncertainty for investors. And anyone could feel confused by the government’s approach to local energy decision-making – does central government have the last word (shale gas) or do local communities (wind)? Wise investors recognise that sociology as well as geology is an important development criterion. If anyone succeeds in taking forward shale in the UK, it is likely to be the company that chooses development sites in areas with an industrial heritage and businesses that can benefit from lower energy prices.

The pressing need is for the Government to articulate the overall aims and philosophy of its energy policy. And, as Steve Hodgson argues in his most recent Energy World editorial, it’s the ‘sustainable energy agenda’ – renewables and efficiency – that has been buffeted most by recent announcements. In building confidence, my own priority would be the management of the Levy Control Framework which caps subsidies for renewables and energy efficiency. Whether this constraint bites or not is hugely dependent on volatile wholesale energy prices. Clarity about how the government intends to respond to that volatility is top of my list. And a comment on Hinkley Point developments would also be good. “DECC says no fears of Hinkley delays, despite review” was the headline in Engineering and Technology Magazine last November.

Fewer swings, more roundabouts please

Louise Kingham OBE FEI EI Chief Executive

Louise Kingham OBE FEI
EI Chief Executive

The old fairground saying – what you lose on the swings you gain on the roundabouts – might apply to a number of sectors where the economic cycles of expansion, contraction and growth once again are readily managed by companies following periods of releasing and then recruiting people. However, when the energy industry needs to compete to attract talent, leaving it to ‘natural’ cycles alone – for HR teams to respond to when need arises – is not enough.  Given the energy industry underpins daily life and brings such value to society, it’s industry-wide collaboration, facilitated and supported by independent bodies like the EI, that is needed beyond, and in support of, what individual companies need to do. And, the companies need to get behind that approach to build critical mass and recognise it’s about reputation too.

EI inspiring young people at the Big Bang Fair 2015 to take up energy careers

EI inspiring young people at the Big Bang Fair 2015 to take up a career in energy

Last week the EI supported the Big Bang UK Young Scientists and Engineers Fair which hosted 75,000 children, parents and teachers to a festival of what Science, Technology, Engineering and Maths (STEM) careers can offer. By no coincidence its also British Science Week which is a ten-day celebration of science, technology, engineering and maths – featuring fascinating, entertaining and engaging events and activities across the UK for people of all ages. And to do their bit, the Department for Energy and Climate Change hosted the My Energy Job online energy careers fair which the EI also supported.

The EI is promoting and hosting the development of DECC’s POWERful Women initiative as well as supporting pan-industry declarations in science and engineering to improve diversity, equality and inclusion. EI is also investing to develop its Young Professionals Networks, Student Chapters and Mentoring Schemes as well as looking at innovative ways to connect growing professionals with experienced ones.

Why? Because developing people is a long term investment and for an industry to really prosper and add value to society in the way that energy needs to, its continuous promotion, even when times are more challenging, is essential to building the pipeline of talent we need  – roundabouts not rollercoasters.

May you live in interesting times

Ian Marchant

Ian Marchant FEI, President

We are now only a few months away from the UK General Election and, at this stage, it seems to be one of the most unpredictable for a long time, if not ever. In fact, one report that I saw analysed 10 different possible outcomes for who would form the next government covering majority or minority governments for both the larger parties and then a whole raft of different coalitions.

The election is being fought on more predictable grounds with things like the economy and the NHS coming to the fore. Every now and then another topic seems to dominate the media coverage and so far energy hasn’t been one of them. I hope that at some stage in the next few weeks it does get an airing as the new Secretary of State for Energy and Climate Change is going to face some interesting issues in his or her in-tray. I think that the following will be near the top:

  1. How is the UK oil and gas industry responding to the low oil price and what can Government do to create a stable and supportive investment climate? This folder will, I imagine, recommend a quick visit to No. 11 Downing Street.
  2. What will be the outcome of the complete investigation of retail energy supply and how should the government of the day react given that, since the investigation was launched, competition has increased and prices have decreased?
  3. What progress is being made on implementing the recommendations of the Wood report to secure the long term stewardship of the North Sea assets to maximise long term recovery?
  4. Is the much vaunted Electricity Market Reform actually going to secure the UK’s security of supply over the next couple of winters, and then put us on the road to decarbonising the electricity sector in the next couple of decades? This brief should recommend a long, hard and rigorous look at the capacity margin in the next two years.

Of course on the climate change side of the department the issues are no less serious as the new government will be taking part in the Conference of the Parties (COP) meeting in Paris later in the year where the subject of an international agreement on emissions reduction is, once again, on the agenda.

Here things seem a bit more positive in that the leaders of the Conservatives, Labour and Liberal Democrats parties have signed a joint pledge. This didn’t get much coverage as it was swamped by a megaphone debate on tax avoidance so I thought I would provide a link to the agreement, see www.green-alliance.org.uk/resources/Leaders_Joint_Climate_Change_Agreement.pdf

When I step back and think about the next few weeks I am reminded of the alleged Chinese proverb “May you live in interesting times”.

On 3 March, the EI will be hosting a pre-election energy question time in London with representatives from the political parties. This debate will provide delegates with the opportunity to engage in the discussion and express your own views on energy policy issues.

 

An audit for audit’s sake doesn’t make for good practice

Louise Kingham OBE FEI

Louise Kingham OBE FEI

You could be forgiven for struggling with the DECC’s published guidance on ESOS as it’s not an easy read but, in the Department’s defense, the devil is always in the detail so DECC is obliged to set it all out.

The EI, as a supporter of ESOS with resources to enable its implementation, has produced a simple guide to help senior executives of companies that must comply with this new mandatory scheme to complete energy assessments and identify energy savings opportunities. Broadly speaking, if your UK business has

1) 250 or more employees
2) an annual turnover of more than 50M Euros and
3) a balance sheet of more than 43M Euros

you and any other UK organisations will need to comply. There are nuances to all of this so it’s worth reading the detail or contacting DECC for advice well ahead of the end of this year.

Compliance requires you to estimate your total energy consumption and audit the areas of most significance for a report which is signed off at company board level and lodged with the Environment Agency.

Now that’s where compliance stops and good practice starts. Why? Because it’s good for the bottom line and can turn loss into profit, it’s good for the environment and demonstrates the social pledges companies can make and the benefits that can be passed onto the customer. So don’t stop at the filing of the report, don’t even stop when you celebrate the first year’s energy and financial savings. The clue is in the title – energy savings opportunity scheme….