Talking New Energy: What's missing in the conversation about clean power 2030?

[00:00:01.820] - Jon Slowe

Welcome to Talking New Energy, a podcast from LCP Delta. I'm Jon Slowe.

[00:00:06.480] - Charmaine Coutinho

And I'm Charmaine Coutinho.

[00:00:08.260] - Charmaine Coutinho

Together, we're exploring how the energy transition is unfolding across Europe through conversations with guests at the leading edge.

[00:00:16.380] - Charmaine Coutinho

Hello, listeners, and welcome to Talking New Energy. My name is Charmaine Coutinho. I'm your host for today. Today, we're going to be talking about the regulatory and policy environment in the UK at the moment, which is rapidly setting the for the next decade of road in the energy sector. We welcome our guest today, Dhara Vyas, heading up the UK Energy Trade Association, Energy UK. Hi, Dhara.

[00:00:40.430] - Dhara Vyas

Hi, Charmaine. Thanks for having me.

[00:00:42.420] - Charmaine Coutinho

Brilliant. Just a bit of background for our non-UK listeners, and actually probably even for our UK listeners, depending on how much you follow policy regulation. Probably about four months ago, we did a quick podcast overview around the UK government's energy plan. I think it was in September. It was quite newish at the time. Broadly, energy and net zero was a very key policy that was part of the new government, and that has remained really since then. But I've had to summarise what that was, that policy, in the UK, it's referred to as Clean Power 2030, when abbreviated, which is really looking at a net zero grid or 95% low-carbon, which is what it's been defined as by 2030. This is going on as well as a huge amount of background of market reforms that have been rumbling on probably for the last 15 years, really, probably longer than that. Those include everything from changing the way network tariff are priced, so reforms towards more localised pricing, local energy planning. Many, many different reforms around the retail energy market and consumer protection, a general security supply. Probably the list goes on and on. But for a lot of these elements, and in many other European and global countries are already dealing with this or have dealt with this in the past.

[00:01:59.970] - Charmaine Coutinho

Just as we're talking about the UK today, it's actually hopefully of interest to a lot of our non-UK listeners as well. The government has also done some interesting questions recently. Our Chancellor, Rachel Reeve, has recently asked UK Which is how they're going to be helping with UK growth. Lots of very hard questions all centred around energy, which we're going to cover off today. However, before we get in place, let me ask Dhara for a quick introduction to herself and to Energy UK for those of you who are not familiar with her.

[00:02:32.450] - Dhara Vyas

Thanks, Charmaine. You're absolutely right. I think what you've done has just set out a really broad range of issues and things that we care a lot about. We are the representative body for businesses operating right across the energy system. We have within our membership, a tech agnostic approach, as it were. Within our membership, we've got about between 85% and of a UK generation that's nuclear, onshore wind, offshore wind, solar, gas, biomass. We've got the whole range of technologies. We represent companies through the system, so transmission network operators. We've got the really interesting projects around storage, long duration, pumped hydro. We've got companies involved in all of that. We also represent and are the only Trade Association representing energy suppliers, which gives us this really unique look at both supply and demand and the customer angle and the end-user angle, businesses and households. Then we've got lots and lots of businesses who are operating across the system in different ways, whether that's because they're involved in flexibility, aggregation, or they manufacture heat pumps, or they're involved in EV chargepoint operation, or their heat networks, or they've got new exciting technologies like infrared heat.

[00:04:00.590] - Dhara Vyas

We've got this whole range of different businesses and different technologies. The reason I think that's worth thinking about is because increasingly, we are more and more aware, I think, as people involved in this space, as anybody who works in this area, of the impact that intervention at any one point in the system has and decisions made about something to do with power generation, what that means as a knock-on effect right through the infrastructure we need to use, the system and how it deploys it, what those costs are and how it ultimately impacts on people. We can see right across that system, and we don't lobby for any specific technology. I think that gives us a bit of a unique look in this space. I think it's exactly what we need right now as we rapidly accelerate towards our clean power system and as we make our way through the energy transition, because the next bit of the transition, I think, is going to be different.

[00:05:04.870] - Charmaine Coutinho

Unpack what a different means for you?

[00:05:07.250] - Dhara Vyas

I think the UK has done really well on reducing carbon emissions, and that has primarily been because of our power sector. We've led the way on reducing carbon emissions, and we should rightly be really proud of that as a country. However, the next bit is all about hearts and minds. I think the argument, whether you want to call it net zero, whether you want to focus in on energy security, whether you want to think about the energy transition in the broadest possible sense. The reality is it will all be won or lost on whether or not we get the conversation with the public right. Because energy is a catalyst for economic growth. This is a new government that is hurtling towards a really, really ambitious target of Clean Power 2030. I think industry has a really significant role to play in this space, but industry can't do it alone. It isn't right, I think, for business to try and have this conversation with the public alone. It is very much about how we can work in partnership with government to make sure that we get this right, because we are operating in an environment where there is significant scrutiny, and often rightly so.

[00:06:13.390] - Dhara Vyas

We're spending lots of money. We're making significant changes with things like pylons and building infrastructure and locating assets in different places. It's right that we have a really good scrutiny process, and we understand what's going on, but we're also, as is the rest the country and the rest of the world, we're operating in a time of increasingly polarised politics and scepticism, and you could argue culture wars or populism. We need to really think about how our businesses in the energy industry impact and engage with people during a time of global uncertainty, during a time where we are still paying the price of not investing in domestic clean power generation and the impact that the energy crisis had on people's bills.

[00:07:06.430] - Charmaine Coutinho

Yeah.

[00:07:08.170] - Dhara Vyas

Affordability, fairness, social impact are all intertwined with this conversation about the trust and reputation of our industry. I think it's right that Energy UK is thinking about this in the broadest possible sense. It's certainly what I think I was appointed to do was to really think about how to lead the association and speak with and for the industry during this next really tricky phase.

[00:07:29.650] - Charmaine Coutinho

It's really interesting. It's a good point. There's a couple of things I wanted to pick up on. One, the piece you said about trust. Over the years, we've done some really interesting research where we asked people… I came into the energy sector probably from a manufacturing perspective, like 15 years ago. But when I started working at retailer, everyone's talking about trust, trust in the big six. In the UK, those are the big energy companies who were seen as both, not the enemy, but a little bit… There was a lot of easy tabloid wins about talking about the big six and making massive profit. But at the same time, you also had conversations with people of who would you trust to give you advice around energy, and it always came out broadly with the big six as well as friends and family. Trust is a really interesting one, which maybe we will come back to in a moment or later on. But also, that whole systems approach. That really what happens at the consumer end affects the generation end and what happens at the generation end affects the consumer end. That's personally a very big passion project of me, not least because I'm not very good at separating things into boxes.

[00:08:32.670] - Charmaine Coutinho

You talked a little bit, so for those of you not familiar, Dhara was appointed about six months ago, is that right?

[00:08:38.250] - Dhara Vyas

About three.

[00:08:41.240] - Charmaine Coutinho

Sorry. You've done so much in your time. It felt like six. There you go. Tell me about, and I think you're quite a different type of leader for Energy UK compared to historically. I hope you don't mind me saying that.

[00:08:56.450] - Dhara Vyas

No, I think you're right. I think my predecessor was a different leader for the association as well. Many of the people listening to the podcast will be familiar with Emma Pinchbeck, who's gone on to be Chief Executive of the Climate Change Committee. She was appointed, having worked at Renewables UK, but also having a real climate change background, and very much came in just before the pandemic with a conversation around where the industry is on the subject of net zero. How do we really think carefully about the role of industry when it comes to meeting the net zero target that Theresa May brought in when she was Prime Minister. That conversation was different. What we've had since then was Covid, and an energy crisis. Bills at their peak were over £4,000, a lot has happened in five years. I think in many ways, we're trying to figure out what the real new normal is. But I think that's probably true for everybody, regardless of what business you work in and even in your private life. Working patterns have changed, people's lives have changed because of everything we've been through as a country. But for the energy industry in particular, this focus on energy security that we simply were not having the conversation about energy security five or six years ago.

[00:10:22.660] - Dhara Vyas

My background, the early part of my career was in local government, and then I've worked in the charity and consumer sector. I worked for the statutory consumer body for energy customers, leading work on how energy customers engage on the retail side, vulnerable customer issues, and then also on the future energy system side. What is that trade-off between how you're making policies and implementing things so that they work for people today but are also ready for people tomorrow. That's something that I think we always have to keep coming back to in energy policy is that there are always trade-offs to be made in any policy space, in any policy conversation, whether you're thinking about impact on customers today or impact on customers tomorrow, trade-offs between rural and urban areas. There's always going to be a conversation about who feels the impact of the decisions that government is making and the way that industry operates. My background coming into Energy UK was very much around the next bit of the transition is going to impact on people for households and for businesses as well. It's all about how do we make our buildings really efficient?

[00:11:36.080] - Dhara Vyas

How do we use the least we need to where we can? Because arguably, the cheapest unit is the one that you don't use at all. How do we decarbonise heat? Over 80% of our homes are on gas for heat and central heating, and we need to change that. Then how do we optimise our homes so that actually we are able to use energy when it is cheapest and most plentiful on the grid? Because we're going to be investing in our clean power system, let's make sure we can use it smartly. These are three big changes that are coming down the line. When I joined Energy UK, I think that was very much the space I was in. However, I joined, then we're in the energy crisis and we're now in a very different space. People owe, I think, nearly £4 billion, £3.9 billion in debt now to energy suppliers. Prices were really high at the peak of the energy crisis. We are still living in the long shadow of the energy crisis. For many people, the impact on household bills remains significant. Bills are still anywhere between £500 and £700 higher than they were pre-crisis.

[00:12:47.580] - Dhara Vyas

I think the focus has to be on stability and fairness when it comes to how we're paying for energy, and we need an honest conversation about that.

[00:12:57.160] - Charmaine Coutinho

I think that is the honest conversation is, I think, it’s definitely something which is very difficult to have at the moment. Well, it feels like it's very difficult to have at the moment. I don't think it is. But in the context of just trying to bridge a little bit into the Clean Power 2030 targets and what that means. I think the conversations about the amount of money that will need to flow into that to make that happen or get close to that 95% low-carbon. But then for me, it's always been, okay, and then what happens after 2030? Because there's still so much to do and very much the attention starts to go very much into what's happening inside homes and businesses beyond 2030. Building up supply chains for that smart energy, that low-carbon energy, and doing that in a way that does help protect the people that need to be protected in society. But also, as you said, living in that new normal where I don't know whether they're all going to get massive pay rises in the next 10, 15 years, but our internal home and business budgets have changed probably quite significantly and we'll stay like that because economics are different.

[00:14:05.700] - Dhara Vyas

Look, I think that leads into two things. It's a conversation about Clean Power 2030, but it's also about more generally, we We've just had a weekend and the last week full of the Chancellor really focusing on growth, going to the World Economic Forum, talking about how to stimulate growth. But the reality is actually that's where this government has been before the election. They've really focused on that. They have come in and have a really big task ahead of them. This idea of aligning across five missions where we've got this Clean Power Mission with a really ambitious target of 2030, which we welcome. I think that for a long time, we've called for ambition, we've called for certainty, and we've called for decisiveness. There is something around our industry now stepping up to that and responding because I think that's what the government is trying to do in the clean power space. On the growth side of things, as far as I'm concerned, energy is a catalyst for growth in the country in that we have a unique role to play. All industrial revolutions have had an element and an angle of energy being the driver.

[00:15:25.110] - Dhara Vyas

We are on the cusp of another revolution. Call it an industrial revolution if you want to. It's low-carbon energy investment can have a huge impact on contributing to that. But also, what we can do is really think about how businesses operating right across the economy engage with energy. We know that we have really high prices in this country. We have to invest in our own domestic low-carbon power generation in order to try and bring those prices down. That, I think, for me is a a really interesting angle for this conversation, which is actually what's the role of the energy industry in this space and how do we properly work with our colleagues across broader business space to think about how to creatively bring prices down, whether it's about corporate power purchase agreements, how we could use them differently, how we could extend the time frames, how we can also get involved in supporting businesses to decarbonise. There's so many interesting and exciting There's different things out there. But the reality is businesses are struggling with their own pressures. It's not an easy operating environment for any business right now, arguably globally, certainly in the UK.

[00:16:45.000] - Dhara Vyas

The reality is if our industry can support businesses to bring down prices by working with them on things like how you can decarbonise your operations, how we could consider location of power through corporate power purchase agreements (PPAs), those are all really positive things.

[00:17:05.820] - Charmaine Coutinho

Yeah, I think those two things you picked out there is this all goes well long term will have brought down power prices for everyone. Not really sure what long term really means in this context, but we're talking about 10 years. But in the short term, does it mean a bit more pain because of the investment that everyone's bills will need to go up a little bit in some way, shape or form. But the price is much bigger than those short-term bills, which is obviously what we're seeing It's actually very easy for me to say here on a podcast, the reality of people's bills and it's probably a good idea that I'm not making the policy in business or option myself. I think that's one of the things I've been trying to think through is that the short-term pain, and whether that's costs or anything else and the actual speed and pace we need to go through that, really, which I totally agree with you on the 2030, I think. I think from It's an investment perspective, and one thing I'm quite interested in at the moment is how you look at supply change across the energy sector.

[00:18:07.760] - Charmaine Coutinho

Investors and supply chains, they all need that a bit of security and confidence in order to make sure they're happy with those investments. We have been asking for that for a long time, but you probably talk to more investors than I do, actually. I wonder whether you've got a perspective on that from that view.

[00:18:24.450] - Dhara Vyas

Look, I think we talked a little bit before we started recording this podcast about the international operating environment. The thing we have to always remind ourselves is that capital has a choice of location. We live in really unusual global times, I think. Just this morning, we've had announcements about potential tariffs from the US President. There's something around actually the global trading operating environment that has a big impact on our country and in this country but also could be seen as an opportunity because of your concerns about supply chain are absolutely valid. I know my members are really worried about both supply chain and jobs and skills, if we're honest. I think we… That is intertwined in so much of what we do, including Brexit and the conversation about immigration. It's important to recognise that policy is always interlinked. We're talking... We're talking about energy policy, and that's what we're going to talk about on this podcast. But the reality is decisions made about immigration and tariffs on other parts of trade, they'd have a big impact, don't they? Again, coming back to the interlinked aspect of what we do on the relationship with Europe, which I think is a really important one for us.

[00:19:52.870] - Dhara Vyas

Depending on when this podcast goes out, Kier Stammer is about to go to the Council and it's a real thawing, I think, in the relationship that we have with our closest trading partners in Europe. The UK Emissions Trading Scheme (ETS), which is arguably the cornerstone of the UK's net zero policy, carbon pricing is a powerful tool. It can help us really make progress when it comes to reducing emissions. Having a standalone ETS and having it mirror the EU is really, really important I think, to make sure that we don't have the friction and have frictionless trading as much as we possibly can, because the EU Carbon Border Adjustment Mechanism (CBAM) is going to be fully operational really soon. We're 12 months out of it and we're not going to have a really big lead in time to make sure that we are as aligned as possible. Otherwise, we're going to end up with a lot of costs, I think.

[00:20:56.930] - Charmaine Coutinho

Yeah, and I think your point… I mean, those two things I'm not ETS expert by any stretch imagination, but I'm talking to some colleagues who have done quite a bit of research into that. I think they would concur with you completely and looking at how you take those steps in that bigger net jigsaw puzzle and trying to get that aligned or working as easily as possible because we've got so many other things to be doing on net zero that probably needs a bit more time and problem solving.

[00:21:26.520] - Dhara Vyas

Yeah, and it's about, ultimately, I'm certainly not an expert because actually it's true, not only is our industry complex, anything to do with EU policy, to my mind, is actually quite complicated and it's complex and it really doesn't need to be and it shouldn't be. I think in the simplest possible form, the carbon border adjustment mechanism, as it stands now, would end up taxing UK low-carbon electricity. We've got a Clean Power Mission which actually says we're going to be exporting more and more of our abundant, brilliant low-carbon power that we're going to be producing. Then there's a big disconnect there. We need to make sure that we're aligning everywhere we can so that we can restore efficient electricity trading across interconnectors and that we have a good and useful relationship with our partners in this space.

[00:22:19.990] - Charmaine Coutinho

Slightly related, unrelated, I don't know. My LinkedIn feed is full of people who are much more into the deep geekery around power systems. Every so often, there'll be a couple of long posts around exporting via interconnectors and the value of those and people doing all sorts of clever things. But actually, I think, point it down as simply as having more low-carbon power across Europe, Europe, the geographical Europe, not the Union. And us being able to export that broadly the right times to each other, I think is only a good thing. And trying to make that link as clear as possible when it comes to things like ETS, I think is important.

[00:23:05.350] - Dhara Vyas

Even just the one-hour time difference between us and France makes a big difference, and it means we can trade really efficiently.

[00:23:13.290] - Charmaine Coutinho

Yeah, yeah, yeah. I mean, it's a good... It's a good point, actually. When you think about how... Well, I was quite heartened to see all the announcements about the Interconnectors a few weeks ago, because one thing about Clean Power 2030, which I think you alluded to was pace. It's giving the things we're doing a little bit more pace. People think, all right, we've got to get this stuff done, not in the next two years, but actually we talk about the next six months. I'm sure somewhere internally, there's actually people doing that in the next three months because they've got a long list of things to do.

[00:23:46.660] - Dhara Vyas

It's a big challenge.

[00:23:48.080] - Charmaine Coutinho

Yeah, but that's great. That pace drives change, really. I'm quite happy to enjoy that. What else is front of mind for you at the moment? Is there anything around... We... We've talked a bit about regulation and consumer being at the heart, but is there anything within that big assistance piece that you think is on your list of things to do or thought out? Dhara, what else is front of mind for you at the moment?

[00:24:14.230] - Dhara Vyas

I think we've touched upon, and we've talked a little bit about the auction rounds and the Contracts for Difference (CfD). I think the reality is actually we will need to make sure that we can, as a as an industry and as a country, really get what we need from Allocation Round 7, which will be announced later on in the year. The reality is that we are looking to procure an enormous amount of clean power from the next two Allocation Rounds if we are to deliver on clean power 2030. There's a lot of pressure on the next two contract rounds. I think it's right for government to be thinking about how to consider the parameters, whether there's any option of having a longer period of time for the contract, what that might look like. This is also going to be a slightly different round because we're going to have more pressure on it because of Clean Power 2030, of course, but also because it's the first one that this government will be doing from start to finish. We knew with Allocation Round 6, we needed the budget to be bigger because Allocation Round 5 resulted in procuring no new offshore wind, which is so necessary and so desperately needed because it didn't take into account the increased costs in the system.

[00:25:48.350] - Dhara Vyas

That comes back, Charmaine, to your point and your concerns about supply chain. We have a really constrained supply chain right now because all across the world, everybody wants the things. We all want those high voltage cables. We all want those ships to do the offshore wind. We all want the technologies and the skills and the people who can do floating offshore wind and to make sure we're getting all the semiconductors and the chips. I think that the pressure on the next couple of Allocation Rounds is going to be significant because we want to get so much more out of it in terms of capacity. That's something that we're thinking quite a lot about and thinking about what we want from a policy area in that space for what government could do to make it easier for business to engage.

[00:26:36.530] - Charmaine Coutinho

Yeah, if any of our listeners are actually-

[00:26:40.540] - Dhara Vyas

Sorry.

[00:26:40.540] - Charmaine Coutinho

It's all right. No, go ahead. If any of our listeners are into that should have a quick skim through the Allocation Rounds in the UK because they're quite a good example of how industry can say things, government policies can or cannot take things into account when it comes to things like supply chain price increases or decreases, whatever. Actually, two things that stood out, one, which is when we've done some modelling about what we need to do in this week, sorry, LCP Delta on AR7 and AR8. I think one of my colleagues used the word gargantuan amount of power that we need to be procuring across most technologies. But actually, your point about it's not just the power. The power kicks off all the other things, the skills, that supply chain, the physical equipment, the physical materials. It very quickly takes you into the... We're part of a bigger system where globally we're trying to do similar things. It's a really interesting one and I think it's one that needs to be thought through quite carefully, particularly if you're trying to be realistic about what's actually going to happen and how, really. What would you say is your biggest concern around bills?

[00:27:49.180] - Dhara Vyas

I think we've touched a little bit on debt and affordability. I think that we have to really recognise a couple of things. One is that to fuel poverty is on the increase because more people are spending a bigger proportion of their limited income on paying for the energy, they need to use to stay warm, safe, comfortable in their homes. We, as a society have to really think about what that means. The reality is that the energy retail companies, the ones who bill and bill people at managed costs and debt, they work and operate in the lowest margin bit of our sector. For those companies to also be the ones who are charged with delivering net zero, who are going to be responsible for bringing all the new changes into people's homes so we can use energy flexibly, so we can decarbonize heat. That's a big ask for a company that's also carrying a lot of debt and managing a lot of really big issues for customers who are in really vulnerable circumstances. I think what I'm really glad is that this government has tried to grip it, and we're having conversations with them about data and how we can use data more effectively to target support for people who need it.

[00:29:00.190] - Dhara Vyas

You'll often hear a conversation about social tariff, and I think social tariff can mean different things to different people. The reality is that what we need is a targeted support mechanism for people who need it most so we can really identify who they are and get them the support they need. But that support has to come about in coordination with government because what we also need is for the majority of households, regardless of tenure, whether you're in a private rented, you're a homeowner, or your end social housing, the majority of households, I think we need to start taking them on the energy transition. Unless we can properly identify and target support for those who can least afford to pay for the energy they need to use, we can't really have the conversation about how do we make homes warmer, how do we move to a more interesting, exciting space where we can help you to save money by using energy in a really efficient way? How do we make a plan for when your boiler dies? How do we make sure you're ready for whatever's next? I think those are the conversations we'd like to have, but that focus on protecting those people who need it most has to happen first so that we can effectively have the rest of that conversation.

[00:30:12.460] - Dhara Vyas

For me, I think the two things go hand in with the in hand. We've talked about the auction round, we've talked about procuring lots of plentiful, lovely, clean power. That has to go hand in hand with this conversation about people, and I'm hoping that that's what we can do.

[00:30:28.370] - Charmaine Coutinho

I would love for all conversations It's about AR X 7, 8, 9, 10, location, margin, pricing, everything to always be in the same sentence of that hierarchy of helping the people need it most. Then how do you bring the majority around the energy transition We can just continue having those conversations together rather than it being like an afterthought to one or the other. I think that would be such a powerful directional change and hopefully influence the way it's reported in newspapers and online and things like that.

[00:30:58.140] - Dhara Vyas

I think you're so right. I think, look, it’s not just about renewables, because this conversation is true for the reason we need nuclear. We need to be able to electrify so much of the way that we work across homes and businesses. This is about actually the change that the nation needs to go on. As part of that, we need to be thinking about what that firm power is. How do we make sure the lights don't go off? It's a complicated conversation, but as far as I'm concerned, and I'm glad to say that with my members as well, we're really focused on what's the end outcome for people. Because ultimately, if we don't have households and businesses that can use this electricity, then what's the point?

[00:31:41.400] - Charmaine Coutinho

Yeah, well, I mean, there's no... For a lovely energy sector phrase, which I hate. There's no off-take, and therefore there's no one paying you bills, no one gets paid. Right, I think we're going to have to stop there for the moment. But one last question before we finish up. We have a crystal ball, an imaginary crystal ball. Or there is a real one, actually, but it's more like a disco I think I'll have to walk a walk.

[00:32:02.750] - Dhara Vyas

I like the sound of that.

[00:32:03.370] - Charmaine Coutinho

It's a very strange thing. Anyway, Dhara, in terms of Clean Power 2030 or maybe just the UK energy system, what would be your hopes for where we'd be in 2035?

[00:32:13.640] - Dhara Vyas

I hope in 2035 that we've made the leap into having this clean power system that we're all working really hard to getting towards. I really, really hope that we are well along the way of making it easier for people to engage with the system however they choose too.

[00:32:31.180] - Charmaine Coutinho

Oh, that's lovely.... A lovely little sound bite. We can take that. Thank you. Well, thank you very much, Dhara, for coming.

[00:32:37.790] - Charmaine Coutinho

Thank you, Charmaine.

[00:32:38.550] - Charmaine Coutinho

No worries. Thank you again to our listeners for listening to Talking New Energy. There'll be another and we'll see you next week.

[00:32:46.750] - Charmaine Coutinho

Thanks for tuning in.

[00:32:49.520] - Jon Slowe

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[00:32:57.810] - Charmaine Coutinho

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