Facing the future head on

Louise Kingham OBE FEI Chief Executive

Louise Kingham OBE
Chief Executive

Gloom and doom casts a shadow across headlines about the oil and gas industry as economic slowdown and the continuing falls in commodity prices wipes millions off the value of stock markets around the globe. These circumstances are forcing companies to reshape their businesses with the inevitable pain of the impact this has on jobs, productivity, progress in the shorter term and the wider social impact which can be much longer lasting.

Industry cycles are expected – as are the’ ups and downs’ we experience when we’re in them. Clearly it’s important to ride the down times as well as you can but, at the same time, good leadership always has an eye on the future. Making time to think and understand how things will be different going forward and what that means for our organisations and so, being able to reposition to embrace change is essential.

At the same time, worldwide pledges have been made to reduce greenhouse gas emissions as part of the COP21 commitment. This takes engagement from the oil and gas sector and so, while managing the downturn, the industry is also examining  the challenges and opportunities these environmental responsibilities present.

With that in mind, listening to the impressive line-up of leaders gearing up to speak at International Petroleum Week in London in less than two weeks’ time to tell us how they are facing the future head on will be time well spent. Bob Dudley FEI from BP, Patrick Pouyanne from Total, Ayman Asfari FREng FEI from Petrofac and Igor Sechin from Rosneft are among the many taking part in presentations and panel debates between 9-11 February. I’d suggest you can’t afford to miss it.

We don’t want energy storage

Ian Marchant

Ian Marchant FEI, Immediate Past President

Claiming that we don’t want energy storage seems like a provocative thing to say. For example, the Energy Institute (EI)’s 2015 Energy Barometer report, a survey of professionals in the energy industry, rated storage as the area most in need of innovation. My point isn’t that energy storage isn’t important; it is. My point is that, of itself, it’s not something we actually want. You don’t hear people say that what they want for Christmas is just some simple energy storage along with some socks and a chocolate orange!! In thinking about the technicalities of energy storage we should first think about what we actually want and I believe we want two things: RESILIENCE and FLEXIBILITY.

Let me illustrate with the energy storage that most of us are familiar with, even if we don’t recognise it as such; the fuel in the tank of our car. The typical fuel tank holds 50 to 60 litres of fuel that gives us both instant flexibility even on a cold morning (modern cars are so good at starting nowadays) and a couple of weeks worth of resilience assuming average mileage. Indeed, if we knew there was a supply crunch most of us could probably stretch that full tank for a month or so by car sharing, using public transport and the like.

So that unseen energy storage which comes free when you buy a car and only ties up £50 to £60 in fuel gives us a lot of resilience and flexibility in our mobility. The energy system that has evolved over the last hundred years or so has embedded within it quite a lot of hidden resilience and flexibility. As well as our car fuel tanks we have petrol and diesel at filling stations and tank farms, we have piles of coal at our diminishing number of coal-fired powers stations and we have natural gas in the network of pipes, in dedicated storage facilities like Rough and Hornsea and offshore where at some fields production can be ramped up quite quickly.

However, the energy world is changing. We need to decarbonise our electricity system and then the rest of our energy system. This second stage is likely to increase the role of electricity in meeting our heating and transport needs. The problems are that firstly our current electricity system only has embedded in it the resilience and flexibility that the current uses of electricity needs, and secondly what little already exists is in decline principally as old coal stations shut.  This is exacerbated by the fact that  low carbon forms of energy, be they renewables, nuclear or clean fossil fuels, are not currently known for their inherent flexibility or resilience. So we will be faced with less of what we need just when we start needing more. What will happen when our electric car battery needs to be recharged at the same time as our heat pump needs to work and we want all our lights and gadgets to function but it’s a still calm night?

This is the reason why so many energy professionals put energy storage at the top of their innovation agenda. In deciding on where that innovation should be targeted we need to think about what level in the electricity system we can best provide resilience and flexibility. There are four possible levels: the source of demand (our home for example); the local area (think of the transformer at the end of your street); the generator itself; or the grid as a whole. The answer may be a combination of all four levels and, importantly, may be different for resilience than it is for flexibility. It will be determined by things like economies of scale, the efficiency of sharing the capabilities with others (we don’t all need to meet our own maximum flexibility – if we can pool with others then the flexibility needs of the system will be less than the sum of all the individual needs) and the value of providing security close to demand. I have a hunch that the answer may involve local or even domestic level resilience and generator or grid level flexibility but time will tell.

Debate about energy storage tends to get dominated right from the start about technology, be it batteries, phase change material or pumped storage hydro. However, we need to separately assess our current and future needs for resilience and flexibility, then decide at what level in the system that need can be most efficiently met and only then determine the choice of technology. We have to put needs before technology.

Gearing up for the EI’s 2016 Energy Barometer

Louise Kingham OBE FEI Chief Executive

Louise Kingham OBE
Chief Executive

Although we only published the first Energy Barometer this year, it has already become a widely recognised and understood report by those that help to shape the energy world we, as energy professionals, work to sustain and develop.

From its launch in the Palace of Westminster to the desks of CEOs, to the offices of Ministers and senior civil servants to the national, local and trade media, the Barometer has travelled far and wide, encouraging debate and development of the discussion around knowledge transfer, innovation in energy developments, investment in energy technologies and engagement with customers. The EI has also begun work to address solutions to some of the challenges members raised.

Now it is time to develop the 2016 report. In 2015 we invited some members to form a College. We will soon be sending out invitations to some existing College members and, as we promised, extending membership of the College to new participants to balance continuity with the opportunity for wider participation among the Fellowship and Graduate members in particular. We hope you will want to contribute to this important work.

Officials within the Department of Energy and Climate Change (DECC) are also getting involved this time around to enhance the direct effectiveness of the useful resource that the Barometer has already become. The Barometer is an essential conduit for the energy professionals’ evidence to be heard – I hope you will add your voice to it.

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.

Experience is something not easily transferred but must be keenly shared

Louise Kingham OBE FEI Chief Executive

Louise Kingham OBE
Chief Executive

The EI’s inaugural Energy Barometer report of members’ views on the industry’s important future challenges identified that developing a pipeline of energy professionals was a key concern for those at the heart of the energy industry today.

Respondents emphasised the urgent need to maintain the supply of skilled workers into established and developed sectors. They also express the need to preserve and transfer the knowledge of those preparing to leave the industry to a new generation. This is much talked about as an issue and there are some great examples of good practice within a number of companies in the sector, but it is incumbent in my view for every experienced energy professional to keenly share their knowledge and offer guidance to those that will succeed them. This way we ensure experience isn’t lost and good practice is shared.

As hosts of the POWERful Women initiative we have just launched POWERful Connections – a mentoring scheme led by CEOs in the industry to support those looking to lead the industry in the future. I was delighted with the overwhelming support we had from CEOs we approached to be mentors but interestingly those who could be mentored were not so ready to jump forward without encouragement. Currently we also support individuals with a mentor to help them achieve professional membership. Great support for the early professional and a complement to a mentor’s own CPD. These are two examples of what we do, however, we recognise that more needs to be done and we have plans to expand our offering to energy professionals here because support is needed across all demographics and for those returning from career breaks or with transferable skills from other industries.

As well as each of us encouraging others to be mentored and offering our support to do so we also need to develop programmes that are flexible, practical and light on administration to make them effective. As recognised energy professionals, please feel free to get involved.