11/06/19 – The Future of Energy

Speakers: Sam Hollister, Energy UK; George Day, Energy Systems Catapult; Jo Coleman, UK Energy Transition Manager, Shell UK

11 June 2019

All-Party Parliamentary Group on Energy Costs

‘The Future of Energy”

Chair: Alan Brown MP

Speakers: Sam Hollister, Director of Economics and Corporate Services, Energy UK; George Day, Head of Markets, Policy and Regulation, Energy Systems Catapult; Jo Coleman, UK Energy Transition Manager, Shell UK

Chair’s Opening Remarks:

I’d like to extend a warm welcome to you all to this, the 51st meeting of the All-Party Parliamentary Group on Energy Costs.

I am Alan Brown, MP for Kilmarnock and Loudoun and also the SNP’s energy spokesperson and a vice-Chair of this Group.

We meet this evening to discuss the future of energy and we have three excellent speakers, all big hitters, who are going to cover this from their different perspectives.

I’ll hand over to speakers in turn for you to do 5-7 minutes which will allow us maximum time at the end for a Q&A.

Sam Hollister, Energy UK

The reason why I’m here is that a year or so ago we published an Energy Vision from the sector, which was our vision for a low-carbon energy system that customers see as fair and which delivers excellent service, choice and value for money to all homes and businesses. And then we spent the next year speaking to members and stakeholders and others, trying to find out what it all meant to them and what needs to happen.

The outcome is our Future of Energy Report (copies of the Executive Summary were distributed). There are five individual reports available online that sit behind it, that explore the different aspects.

The other thing to talk about, which George will also address, is Net Zero and the challenges and opportunities we face with that. Energy UK firmly supports the CCC’s recommendation for New Zero and we believe that the country can and should be targeting that, and perhaps we can go faster and further. These are things to be explored and discussed, but any chance of achieving this will depend on the transformation and change in our energy policy and that is going to impact customers and like-minded people throughout generation networks and transport and heat. Since the early 1990s, around £170 bn worth of private investment has got us to where we are today. We’re really here because of the power sector picking up much of the heavy lifting, but actually we think that there needs to be a similar amount of money invested again over the next 10 years or so as we look to further decarbonise the power sector and the role it’s going to be playing in heat and transport.

One of the views is why we call out the Government around the costs of Net Zero is that actually the signals that such a statement can make. It’s important not just to look at the costs but also the opportunities and I think that’s something that got missed in the recent dialogue with the Financial Times.

So how have we got to where we are on power? Well-designed policies such as the EMR, contracts for different capacity markets, carbon pricing – all have provided strong signals and a robust and investible framework, and that’s going to continue to deliver. We don’t see in our report, certainly over the next 10 years or so, to rip up the existing framework that has got us to where we are. If anything it probably needs to go a bit further and it’s good to see things like wind and solar being looked at regarding how they can integrated into the capacity market and what role they can play. We’re very supportive of all the roles of all the different technologies, because there is not going to be one single solution – it’s going to be a number of different factors.

Turning to a few things that our report picks up. One is the Government needs to set clear frameworks for priorities and outcomes that they want to see in delivering Net Zero. If we get clear signals then the power sector can step up and deliver. The report talks about industry bringing forth new business models for multiple new products and services to the benefit of all consumers. We talk about a service-based model, providing a service of electricity of heat, transport and whatever other services need to be delivered. But actually, while those are the opportunities we need to make sure that we’re keeping hold of good things and not throwing the baby out with the bathwater when we talk about opening up the markets. At the moment there are simple things like consumer redress, where you have one point of contact. If you have different contracts with different parties then maybe there’s an issue on who exactly is responsible for what, so we need to do some thinking on that.

Also from the report: industry continues to invest in low-carbon power generation, but with the Government providing a route to market for solar and offshore wind in particular. We see industry support for the growth of electric vehicles to further enable the decarbonisation of transport. There are a few gaps where we think the Government will need to provide some additional investment. We see Government providing a strategy and funding trials on decarbonising heat. That’s probably one of the challenges where we need to think of the power sector and how the decarbonisation of heat can take place without the customers necessarily having to get too engaged. Sure, you might want to go further and faster and have a green tariff or engage in certain ways, but actually we’ve all kind of decarbonised our electricity just by the investments that have taken place behind closed doors. Actually heat is going to need much more engagement with customers, and whether it’s hydrogen, electrification or a hybrid approach, it’s going to need customers to make an active choice. That choice at the moment looks more expensive and less attractive than continuing to use gas boilers. So we almost need to strip back the choice from customers and that is going to be an interesting challenge.

George Day, Energy Systems Catapult

We work with industry, SMEs, regulators and Government, and we approach the energy transition very much from a whole system perspective. We’ve inherited a lot of the Energy Technology Institute analysis and capabilities in terms of looking at the whole energy system, so that’s from not just power systems but also heat and transport and all levels of the value chain from the upstream generation all the way down to consumers.

So I’d like to talk about our involvement with the CCC’s Net Zero Report. We were involved in two ways: one, I was a member of the advisory group chaired by Prof. Jim Watson, looking at the UK transitions and the implications of Net Zero for that. Secondly, we also did a piece of work which looked at Net Zero and its implications from a consumer point of view.

So firstly, from the big picture point of view, we started out by poring over the CCC’s numbers and wondering how we could get emissions down in aviation, in agriculture, and in particular sectors – and asking if it is really possible to do this. The tenor of the conversation was that Net Zero is really very different from the 80% reduction target that we faced, and it’s a challenge of a different order and magnitude. 80% was a really big challenge but Net Zero is a step up from that. So we started off talking about particular sectors and their roles, particular options that we could see coming into play, e.g. hydrogen, but where we ended up was actually talking a lot about policy – and the need for strong drivers across the whole energy system, across all sectors in the economy that produce emissions. And the fact that the starting point that we have at the moment, when you look at it from that point of view, is quite an uneven picture. There are some parts of the economy, e.g. the power sector, where we have seen quite a lot of progress with economic drivers and incentives for people to invest in low carbon, but there are other parts of the power system where we just don’t have the incentives and drivers in place and I think the biggest gap and the biggest challenge is the heat sector. If you map out where we have a carbon price signal the big thing that sticks out like a sore thumb where there isn’t any effective economic price signal is the heat sector. And it’s also going to be the most challenging issue we will have to deal with – involving 27 million homes and the customers who want to feel comfortable inside them. It’s going to be a much bigger challenge,

The other aspect that came out at the macro level was the importance of carbon capture and storage. The CCC and many of us had already been saying, when we were talking about the 80% reduction target, that we couldn’t see a way to do this without carbon capture and storage. When you move to Net Zero it becomes even more vital and indispensable and we really need to find a way to get that into play as quickly as possible.

So that was the macro level and I think Net Zero is a different nature of challenge and it really focusses the mind on getting really strong policy across the board. The second bit is around what it will look like for consumers, and we published a report called Living Carbon Free that went along with the excellent documentation that the CCC produced. This was a kind of user-friendly, readable look at what this might look like for families, for consumers, etc. It paints a picture of living in quite a different way in the future, and making different choices around mobility, perhaps not owning our own cars, obviously smart charging and so on, and also heat in people’s homes, buying service packages rather than kilowatt hours and so on. Basically, the document describes us as living in a world where there is a more innovative set of solutions available combining different technologies, smart controls and different underlying ways of delivering heat into our homes in a way that really enables us to get low-carbon options to deliver what consumers want. That depends upon harnessing the power of digitalisation, smart controls and a lot of the flexible technologies that we talk about. This I think is going to be a real challenge. When we talk about electricity markets I think in particular, because the electricity market is kind of “in vanguard”, we are going to need to look again at the market framework. I think EMR has served its purpose, CFDs and so on, as we’ve got the cost of offshore wind down, but actually to get the finer detail, i.e. the flexibility and the innovation particularly at the consumer end of the market, we are going to need better, more finely grained market signals. So that’s an area where policy development needs to move on.

Jo Coleman, UK Energy Transition Manager, Shell UK

Like the previous speakers, we also very much welcome the CCC’s Net Zero Report and, like George, we contributed to it through the use of our scenarios work and also by sitting on one of its advisory groups. We were on the Cost and Value Advisory Group and we firmly believed that the cost of the transition, and there clearly are costs, are outweighed by the value of delivering it, and the UK being a leader in that.

You may ask, why is that? At Shell it starts at the very top. We see our purpose as providing more and cleaner energy solutions, as that’s what the world needs. We have three ambitions:

  1. to be a world-class investment case
  2. thriving through the energy transition
  3. maintaining a strong licence to operate

Those three ambitions are intrinsically linked, because if we aren’t a world-class investment case today then we aren’t able to invest the $2 bn a year that we have said we will invest until 2020 in low-carbon solutions, but if we aren’t investing in low-carbon solutions we’re not going to thrive through the energy transition, and all of that is underpinned by having a strong licence to operate. So this is really important to Shell.

CCC’s thinking is really similar to ours and the work of the ETI, because we use scenarios a lot to think about the energy transition. Our “Sky” scenario, for example, delivers Net Zero for the world in 2070, so it delivers a less than 2ºC outcome. In order to deliver 1½º it requires extensive re-pollersation (?) But what we clearly recognise is that some countries will have to go faster than others, and this is not something that we deliver on a global average basis. There have to be people who go first and who show the initiative and I think the UK has a role to play in that. Even though it’s only 3% of global emissions, what we do here can have impact.

So when we look at what the UK has achieved, what we have delivered to date in terms of emissions reduction has been predominantly in the power sector. It’s been in terms of changing supply, by changing coal and gas to renewables. What we have to do going forward involves engagement with consumers, and that really shifts the role for industry and companies like Shell. We see our role both as transitioning the supply but also as enabling consumers to make lower-carbon options, whether it be in terms of their power, their heat or their transport. I could talk about any of those forever but I’m going to focus on power.

Our scenarios show that globally, power will need to go from about 20% of energy use today upwards to about 60% globally, and really the UK is not that different in order of magnitude. So we see power as a very significant opportunity for Shell, although it’s not easy. We’re already one of the biggest power traders in Europe and the US, and we have a firm footing in power on which to base that starting point. Last year we bought First Utility and this year we re-branded it as Shell Energy in a deliberate move to stamp our identity and show that we want to play our role in delivering low-carbon solutions to consumers. But it’s not just about the consumer to us: it’s about the whole value chain. We’re also investing in offshore wind and solar although as yet we have no equity investments in the UK. Here we are buying through PPAs at the moment.

And then it’s about knitting it all together, so where’s the role for the trading? for aggregation? for storage? We own Sonnen Batteries for example, whose batteries in Germany alone are in 10,000 homes. The batteries are used by householders in combination with aggregation to sell their solar energy back into the market and to their neighbours.

But it’s going beyond the home and the traditional heating and power as it’s also about the role for electricity in transport. We want to be able to bring transport solutions to consumers in the home, i.e. charging solutions. We own NewMotion which is one of the biggest smart-charging operators in Europe. They are not well-known in the UK but we have a really strong footing in Europe with a network of over 100,000 charge points. Customers will want to charge on the go so we are also rolling out EV charging at the forecourt. We had the first EV charge point in the UK in a public forecourt at a Shell garage in London and we’re now up to about 40 – still relatively modest but growing. And they’re all inter-operable: we see inter-operability between networks as really key, so that consumers can charge wherever they want with a lot of different cards. For the time being that isn’t an option so they are all contactless as well, so users don’t need to be signed up to Shell to recharge at a retail site.

So for us it’s about integration and we want to be able to offer integrated power solutions to customers, but like Sam I think if we are going to get towards Net Zero and deliver our ambitions to grow the power sector and our role in it, we really need to see linkages between the Government’s ambition and the policies that are going to be needed to support that.

Questions and Comments:

Daniel de Wijze, The Energy Institute: Question mainly for Sam about decarbonisation of heat. Do you think it will be achieved mainly through electrification and heat pumps, or by using gas and hydrogen and altering the existing gas grid?

Sam Hollister: What we’ve tried to set out in the report is the different approaches and we’d like to stimulate debate because there is so much good work out there. Work by CCC and Imperial last year on the three approaches (hydrogen, electrification and hybrid) resulted in total cost estimates being similar for all of them. It was interesting that the CCC said it isn’t going to be an economic answer – it’s going to be about consumer acceptance.

We said in the report that it really isn’t going to be one answer for the whole country, and maybe we need to start looking at it locally and empowering local areas. Allowing local areas to compete for funds might be a good idea, for example. But the main message is that there is no simple one-size-fits-all answer.

George Day: I’d just echo that, especially the local areas getting involved. At Catapult we’ve worked with three local authorities to pilot local area planning approaches and it does support this idea of a mosaic of solutions. Parts of towns and cities may be suitable for (say) heat networks while other parts may be suitable for electrification or other solutions. I think there is a debate going on in BEIS about what the dominant solution might be, but actually we are moving more and more to the idea that it’s going to be a mix. Local areas will have a big role to play, especially in social housing and vulnerable groups because there are going to be some big upfront costs in this, and some people will struggle with those costs and will need help.

Jo Coleman: I agree entirely about the mix of solutions. I would just add that we have to start somewhere and we have to start today. There are some obvious places to start, e.g. off-gas-grid homes. Some incentive could be made to them so that it’s easier to make the transition. Newbuild is the other place to start – making newbuild “2050 ready” is an obvious step to take. That could mean biogas, district heating, heat pumps…. If you build a new house efficiently then the heat pump is tiny compared with fitting one into a leaky draughty old house.

Alan Brown: How do you factor in the Government help that’s going to be needed so that people aren’t left behind? You mentioned off-grid, Jo, and there are 1.4 million oil-fired boilers out there, so how do you address that but make it fair?

Jo Coleman: We think for a lot of those oil-boiler homes, heat pumps, possibly even hybrid ones, is the way to go, because they may need a huge heat pump to meet peak demands so you might still need that combination. But it won’t happen without the RHI (Domestic Renewable Heat Incentive) or some similar means of support because it’s too expensive otherwise.

George Day: I think there’s a potential economic and regeneration opportunity here for the regions as well. Think about the amount of jobs and skills that are going to be needed to refit 27 million homes and take them low carbon – we’re going to need a lot of people with a lot of new skills all over the country. There’s an opportunity to get local areas building their local skills base and creating jobs as well as transitioning their building stock.

Sam Hollister: I would like to add energy efficiency into the mix because that’s a key area. In the report we mention two avenues. For those who are able to pay, at the moment there just isn’t the demand for energy-efficient products. There need to be incentives, e.g. in the future in order to sell your home it would need to be a certain EPC standard. In other words, if there isn’t a demand for energy efficiency, you have to create it.

Of course, there will be people who can’t afford it and I think that’s more for Government to address through a National Energy Efficiency Programme.

Jeremy Nicholson, Alfa Energy: The cost of this venture is not unimportant, and we all may have our different views on the accuracy of Treasury forecasts, but nonetheless it’s a non-trivial change. I wonder if you have any thoughts on that. It might be the right direction to go and there might be things we can do to ameliorate those cost for some vulnerable consumers and so on, but is it really feasible to stimulate £100s of millions of investment simply by loading costs onto consumer bills, as has been done so far? When it comes to heat and the rest of the economy there should be greater tax-payer support for this as well as bill-payer support?

Sam Hollister: The National Infrastructure Commission last year said (admittedly on 80% rather than Net Zero) that the cost savings of transport (EVs being cheaper to run) could offset the expense of decarbonising heat. They saw the cost of power as staying more or less stable, and concluded that these three elements played against each other so that in the round, it shouldn’t be much more expensive. Now that was a year ago and I don’t know what they would say about Net Zero.

We often speak about the inequality of levying this onto customer bills, and we’ve picked that up over and over again, but it’ll be a brave Chancellor who says, yes, we’ll take it onto Government bills. But that doesn’t mean that we shouldn’t keep pointing this out, and it will become more and more important as time goes on.

Jeremy Nicholson, Alfa Energy: It doesn’t necessarily need to be either/or – it could be both.

Jo Coleman: Clearly, putting all costs onto electricity bills is somewhat aggressive, and it doesn’t help with heat. If you want people to take on electrified heating it doesn’t help if you’re putting all the costs onto their electricity bills. There does have to be a change, but some of it can be done through regulation, although that does smear cost somewhat. We don’t complain about the additional cost when we buy a car with a catalytic converter – it’s just encapsulated in the cost of the vehicle. So it doesn’t all have to be explicit. There are some areas where the consumer will save and other areas where they will have to pay more.

Dan Meredith, E.On: What does the panel think about economy-wide carbon tax and what it might mean for people? We were going to have a Comprehensive Spending Review where we could get some decisions and implement some of the nudges to start getting these things to happen. We’re not now having that because of Brexit, but nevertheless if you all were able to ask the Chancellor for one thing, what would you ask for?

Sam Hollister: My priority would be energy efficiency because that’s the area where you’re talking about electrification, and heat, and increasing consumption. In practical terms, as I said before, start to stimulate demand. I agree with Jo about newbuild houses, but also we need to look at improving our existing building stock.

George Day: My one thing certainly would not be an economy-wide carbon tax as I don’t think we are ready for that yet. Experience around the world shows us that they become a political hot potato at the centre of political battles. The economist in me wants it but the political scientist says, perhaps not!

The one thing I think I would ask for is his support for BEIS to design a low-carbon heat standard to ratchet down and place an obligation on whoever is supplying heat (however that’s defined, which itself isn’t easy to do) to get the carbon out of their heat supply.

Jo Coleman: I was going to say that the carbon price is the perfect solution but we are a long way off getting one. We like it as a solution because it does send really clear signals to the market and to business. It wouldn’t work on its own though and we would still need support for innovation and technologies that are coming through, so a carbon price wouldn’t have driven solar panels or offshore wind to the price we are at today. There are places where we could see a better carbon price, or a proxy for it, today. Fuel duty for example exceeds the carbon price for petrol and diesel but it acts very well and it’s why we can see oil in the very near term being cost-competitive. On the other hand we have aviation fuel which has no carbon tax on it whatsoever. Whereas home heating is not an option, flying is always an option. So, if not an economy-wide carbon price then better proxies for one would be my wish.

Sam Hollister: I’d just like to ask George a question about obligations, because that is something we battled with in the report. We agree that there needs to be an obligation, but we struggled with who to put it onto – the supplier? the network company? the customer?

George Day: Absolutely. I don’t have the answer and there are a lot of regulatory and other details to sort through, but we do need to get into that territory. The simple solution would be to put the obligation onto the upstream suppliers, to tell them they aren’t allowed to do this any more. But I don’t think that’s going to happen, so we need to look at how we bring standards into play. It could be a combination of things and we need a Government-Industry working group to look into this, so let’s get on with it.

Mark Todd, Energy Helpline: Where do you see energy prices going in the next 10 to 20 years?

Jo Coleman: I would like to think that we would shift from paying a price per kilowatt hour towards an energy service approach. I think we’re a long way off having that because for a company to be able to offer that you have to understand what the customer uses in the first place. Smart meters – love them or hate them – will make the difference here.

The energy transition is going to cost. The CCC have been quite clear about that. You never get hydrogen for the same cost as natural gas and it will always be more, but this is about balancing across the economy. An awful lot of what customers pay is not the direct cost of the energy – it’s the additive costs. You can spread these in different ways so that customer costs don’t go up, but ultimately society will pay one way or another for the energy transition. It might be in tax, it might be in cost of goods, it might be in bills – society pays one way or another. So I’m not saying whether they’re going up or down!

Sam Hollister: It’s an interesting point that Jo makes, but it’s also about what service you’re getting and who is delivering it. I doubt we will have the same companies in ten years that we have now. One of the things we explore in the report is what if you get your EV electricity from one supplier and your domestic electricity from another supplier? Or maybe a fridge that has all the energy paid for upfront in the price of the appliance – that then becomes confusing for customers who end up now knowing how much they are paying. And what if something goes wrong – who do I turn to? That’s probably one of the barriers that might stop us getting to a service-based model. It opens up the market but could end up with thousands of suppliers trying to compete for niche markets. Having a small number of energy suppliers is actually much simpler for a customer. So I haven’t answered your cost question, but I do think that areas of innovation might bring prices down.

George Day: I imagine that the overall cost of energy to the economy, as a whole, needn’t go up all that much, but there are going to be transitional costs. If we do it right and design good policies we can get through the transition pretty efficiently and not load a lot of extra costs onto consumers and businesses. But if we screw it up and we don’t get the right options into play then it could end up being a big drag on the competitiveness of the economy and prosperity in general. Re the questions about particular groups, yes, we do need to focus on that as there are going to be some groups who will find particularly the heat transition difficult to face. There are going to be some lumpy costs so we will need some sort of clever financing and burden sharing and local authorities and regions can play a powerful role in that.

Alan Brown: Given Brexit and current politics, do you have faith that the policies are all going to be selected to create a smooth transition?

George Day: Well, there are clearly opportunities to do this well or to do it less well. There are definitely opportunities for local authorities and regions, particularly in heat transition where we need to skill people up, invest in infrastructure and building stock all around the country.

Iain Beveridge, Ecological Energy: Do you think there is going to be anything in the Energy White Paper that is going to have any teeth towards this?

Sam Hollister: One of the big questions is going to be around decarbonising heat and I think the White Paper will be too early for that. We’re expecting a huge strategy next year and there’s talk about that being brought into the White Paper process. What I’d like to see is what Dan asked earlier – what would we ask the Chancellor for? – let’s get some serious trials for decarbonising heat. I doubt that the White Paper is going to come out in July with definitive answers.

Jo Coleman: The hydrogen team is certainly looking at the White Paper and what they are going to put in it.

George Day: I’d like to see it open up the post-EMR electricity market debate because I do think we need to look again at that in terms of getting better market signals for flexible technologies, for the involvement of local networks and to get better and more innovation going on at the distribution and consumer level. If we’re going to have a lot of offshore wind and renewables then we’re going to need a lot of clever stuff at the other end and I’m not sure we’ve got the market framework that’s going to drive the innovation there.

Alice Grundy, Solar Media: How big a role will storage have in getting to Net Zero and what kind of policies would you like to see to support that?

Jo Coleman: I think storage – in all sorts of different ways – will play a very significant role. I mentioned our company, Sonnen, that supplies small-scale batteries. It isn’t just about electricity storage in electrons and it isn’t just about storage in homes, it’s also about storage at distribution level and EV batteries, and at grid level. We talk a lot about hydrogen, which is hugely valuable in terms of very deep decarbonisation because it plays a role across the whole economy and across the whole energy system, and it’s so easily stored across seasons. So then you’re talking about deep salt cavern storage as well, so I think there’s a very significant role for storage at different scales and levels. We are making a start but there needs to be an opening up of the market to allow more.

George Day: Storage – I don’t know – I think it’s one of the sets of solutions and will play a significant role at different levels, but it does need the market signals to bring it through because you need a price difference to make it worth storing. You want to buy it cheap and sell it expensive and if you have a market design that doesn’t accurately signal value accurately then you’re not going to get as much investment in storage that adds value, and that’s why I think we need to look again at the investment signals and price signals for these kinds of technologies. There’s some way to go in terms of rewarding flexibility and we need to give that some more attention.

Sam Hollister: Picking up the point around flexibility – we need to work out how we either incentivise or make it the default option that customers charge their vehicle smartly, making the best use of the assets.

Iain Beveridge, Ecological Energy: There’s been a lot of talk about the complexity of trying to levy carbon prices into the network. If you simply put a carbon levy on anybody selling energy into a given network, wouldn’t that stimulate competition and innovation in one package? Leaving heat aside for the moment, if you look at the electricity network, if you have suppliers who are delivering energy into the network and one is low-carbon and one is high-carbon, the people who are supplying that energy have a natural price competition. You could even possibly wrap security or time of supply into the scenario as well, so that people who are able to deliver energy into the network when the network wants it would again have a price advantage over those who wouldn’t be able to. So there may possibly be a simpler mechanism that could be looked at and, if regulated in a relatively simple way, it would enable the free market within regulation under carbon and time of supply to take on the cost burden of a big portion of the decarbonisation required.

George Day: Yes – if we could make it work. At the moment electricity is covered by the European Emissions Trading Scheme and there’s also the carbon price support top-up mechanism. It’s not at a high enough level yet to incentivise the rate of decarbonisation that we need for electricity, so we’ve had to rely on other instruments like CFDs to reward low-carbon technologies. The carbon price on its own has not been enough, and I guess that ultimately that comes back to the political challenge. Maybe Brexit would give us more freedom if we were designing our own emissions trading scheme but I still think that politically it is very challenging.

Jo Coleman: Putting all the responsibility onto generators, whatever the fuel is, is only half the story. For example, we would like to be investing in offshore wind today, but we have to wait for the licence rounds. So it’s not just about putting an obligation back onto suppliers – you actually have to enable that by opening up the acreage that allows us to invest. If you think of gas and the transition, couldn’t we just create hydrogen instead of gas and put that in? No, because you’ve still got to change all the burners in people’s homes, so you can’t just go to a 100% zero carbon gas without doing massive changes across the whole system. So I don’t think that just obligating the supply coming into the system would work for that reason. And we’ve ignored liquid fuel in this as well. I can’t make zero-carbon liquid fuel, I can only put an EV charge point next to it. But I can’t make the customer go to the charge point because he has to buy the car before he can do that.

Damir Ahmovic, Alfa Energy: Is it worth thinking about creating some kind of fixed-income bonds that would determine the level of investment from offshore??? which could be underpinned by the Government? It’s an easy route to burden the taxpayer and the customers but there’s got to be some kind of financial instrument that could be put together that could spread that investment over a period of years. Is it worth speaking to the Treasury and asking if there are other forms of finance other than just taking the easy route?

Jo Coleman: I think it’s a good idea. We’ve all heard of the regulated asset base approach being used in the nuclear industry for example, so there are ways in which the Government can support reducing costs. When we talked earlier about carbon capture and storage earlier, in the last attempts to get this running the whole of the cost and the risk went on the power provider and that added to costs enormously. The nuclear industry will tell you that half the cost of delivering a nuclear plant is the financing cost. So if we can bring down the cost of financing, that makes a massive impact and Government can play a role. However we and the Government believe in markets and we don’t want anything to end up under regulated visits???.

Damir Ahmovic, Alfa Energy: I have a working model in my mind and would be happy to discuss it later, but basically you would define the sum of investment, chop it up into investible chunks, and offer it to the likes of pension funds and institutional investors and funds that would like to have a fixed income asset that can be mutualised and absorbed across 20 years.


After some further discussion, questions and comments, the meeting closed at 7.10 pm.