Jim Skea has research interests in energy, climate change and technological innovation. He has been RCUK Energy Strategy Fellow since April 2012 and a Professor of Sustainable Energy at Imperial College since 2009. He was Research Director of the UK Energy Research Centre 2004-12 and Director of the Policy Studies Institute 1998-2004.
He has operated at the interface between research, policy-making and business throughout his career. He is President of the UK Energy Institute. He is also a member of the UK Committee on Climate Change and Co-Chair of IPCC Working Group III for the 6th assessment cycle. He was awarded a CBE for services to sustainable energy in 2013 and an OBE for services to sustainable transport in 2004.
© The Open University
Stories of Change Project
Jim Skea's interview
RH: = Roger Harrabin, interviewer
JS: = Jim Skea, Research Councils UK Energy Strategy Fellow
RH: Jim Skea thanks for agreeing to be interviewed by us. Can I start by asking you when, was it that you first got interested in energy?
JS: I first got interested in energy way back, it was actually during the first energy crisis which was essentially the first time energy was fashionable, I was graduating with a degree in Theoretical Physics from Edinburgh. I knew I didn’t want to be a physicist when I grew up and one of my professor’s colleagues was setting up a new interdisciplinary group looking at energy down at the Cavendish Labs in Cambridge and offered me the chance to do a PhD there, so I grabbed it. And that’s where my interest started, a little bit on and off, but I’ve been looking at energy ever since then.
RH: And that was a peak then of interest in energy, energy research, energy investment and then it went dead, didn’t it?
JS: I think what happened, it’s very interesting, you can get a graph from the International Energy Agency that shows how much government spent on energy research over the last 40 years and there was a huge, huge surge in the late ‘70s and the early 1980s and we’ve had another surge again actually in the last 10 years or so. But I think what drove it down was the big fall in oil prices that took place in the mid-1980s, so everybody started to feel relaxed about oil markets again and I think when we went into privatisation of the energy sector and liberalisation, there was the idea that energy was just another product like baked beans that didn’t need any special attention. And I think from these years, maybe from sort of the late 1980s through ‘til about 10 years ago, energy really didn’t get the same kind of prominence in political terms, there was lot of market things happening, but it didn’t get the same prominence politically.
RH: Well it was the same journalistically as well, I’d try to get stories on on energy and they would put me on air, but there was also this slightly curious head shaking, ‘Roger’s doing another story on energy, why is he so interested in those?’ <Laughs>. It was really puzzling. So you think now the situation has firmly changed?
JS: Well I think that’s interesting to speculate, because we are obviously at a very interesting time now with oil prices having fallen down to $40-$50 a barrel again, there’s a wonderful graph that shows you public expenditure on energy research and if you correlate it with oil prices, miraculously the correlation is almost one-to-one. <Laughs>
RH: How surprising! <laughs>
JS: <Laughs> Well, I don’t think the link is absolutely direct, but you know given that prices have fallen again, you see the sense… there’s more fossil fuels coming onto energy markets with the shale gas revolution, etc., you have to be alert to the idea that the fundamental dynamics may have changed again, but on the other hand we’ve got this climate change challenge which is absolutely critical for the public policy side of energy. So I think we’re in a very interesting, unsettled kind of position; periodically you can see the tectonic plates shifting in energy and I do feel we’re at one of these kind of moments again.
RH: Which way is it going to move?
JS: If I knew that I’d be very safe, wouldn’t I?
JS: I don’t know, frankly!
RH: You did a report recently looking at public investment into energy research and development and private investment and there does seem to be a mismatch between the two.
JS: What we found there was that the public sectors at least in the developed countries and the private sector in the energy field are spending roughly the same ball park worth of money each year on energy R&D.
RH: The sum of how much?
JS: It’s around $20-25 billion; it’s that kind of level.
JS: Each, yeah. The issue is that most of the public sector money is going into what you might call transformational kind of things; things that would take the energy sector in a new direction, so a lot of investment in energy efficiency, in renewable energy and increasingly in infrastructure, smart-grid kind of issues. Most of the expenditure in the private sector is going in the oil and gas sector, basically looking for ways of getting fossil fuels out of the ground more cheaply and more effectively, so there’s a bit of schizophrenia if you take the public and the private sectors together at the moment, a kind of tension where the private sector R&D will make fossil fuels cheaper; on the other hand the public sector is trying to drag the energy system a bit away from fossil fuels, towards lower carbon forms of energy.
RH: Well the public sector has made solar vastly cheaper, hasn’t it, that extraordinary and some people thought at the time, Quixotic ambition from the Germans for a million solar roofs in cloudy Northern Europe, but that unleashed a huge amount of private investment into R&D and then stimulated the Chinese to produce their solar panels, which they did much more cheaply, there was over production, the solar price kept tumbling down. We’ve seen a really extraordinary move in solar, thanks to a public initiative.
JS: Yeah, I think the results of all these things are a bit of a combination of public and private sector activity, because the private sector will only move once it has the confidence, there is a market there for the new technologies and the heroic gestures that the Germans made in supporting solar energy definitely provided a kick start. Solar energy was always coming down the cost curve, if you double the amount of solar energy investment globally in a cumulative way, the costs have tended to come down and the massive amount of investment that the Germans encouraged, stimulated that learning by doing, got the Chinese into the market which brought costs down further. So there’s a kind of interplay between the public and private sectors that’s helped there.
RH: And now you have millions of people in developing countries, thanks to cheap solar power and highly effective LEDs, you have people being able to charge their phones, use lighting so their kids can do homework, improve their local economy, stay in villages, thanks indirectly due to this, what you called heroic investment by the Germans.
JS: Yeah. Yeah.
RH: So it’s a gift to the planet really?
JS: I think I would provide more a kind of nuanced view of it, because I mean the Germans did it for different kinds of reasons, it was partly greater community ownership of energy was one of the stimuli there, big communities wanted to feel self-sufficient. They actually started off a vested interest almost, in investing in the solar energy. In developing countries the driver is a different kind of thing, it was access to energy, being able to leapfrog the idea that you didn’t need to put in electricity lines, transmission networks, by having distributed energy you could bring energy to people and give them that access much more easily. But it’s interesting talking to colleagues more in the development NGOs, that investment would probably have taken place without the Germans having done the big push. Some of my colleagues give examples of entrepreneurs without a cent of public sector support setting up micro-enterprises where they’ve bought a solar panel and they basically charged people to charge their mobile phones for them, that is real micro-enterprise working and shows where technology plus enterprise can take you.
RH: I’d like to bring up something that Saleemul Huq, another one of our interviewees, an academic you know well from Bangladesh said. He said that when we look at the statistics on solar power and renewables generally, but particularly solar, we see that they’re still just a tiny, tiny penetration in terms of the amount of megawatts of power produced, just a few percent, even in a country like Bangladesh which is very sunny, and when there’s heavy penetration of solar in the rural market, but he says this actually creates a distorting opinion if you look at those pie charts and see a tiny bit for solar, his point is that if you think in terms of the number of people who have received electricity from solar, it is really, really high, and so we’ve got to start looking at the statistics differently. Do you think he has a point?
JS: You know in a lot of cases we tend to look at the energy mix through a very developed country lens and that focuses on the kilowatts and the kilowatt hours, the contribution to the overall energy balance. But in countries where you don’t have that well-developed infrastructure the value of getting electricity to people may well beyond just the simple, commercial benefits, because you’re opening up new possibilities, you’re providing a kind of platform, a foundation for new forms of enterprise and development. Frankly, I think it’s up to developing countries in thinking about what their own needs are to think about what the appropriate indicators are. In a way it doesn’t surprise me at all, but it might be appropriate to think about indicators that refer more to access, to development goals, because that is the kind of benefit that you get from that access to energy. It’s not the carbon dioxide side of it, its reduced air pollution, lots of other things.
RH: But you’re an academic right at the heart of international talks about these matters, isn’t it incumbent on people like you to start looking at it differently too or presenting the material differently or at least in parallel?
JS: I think you’re starting to move there, the Inter-Governmental Panel on Climate Change in the last Fifth Assessment Report actually paid a lot of attention to sustainable development issues in the report. You know there was a huge chapter, simply on sustainable development, right at the beginning of the Working Group 3 Report from IPCC. So I think things are moving on there and as you look towards the next IPCC Assessment Report there is an increasing, increasing emphasis on the role that developing countries actually play in the process, because at the moment the process tends to be dominated by developed country scientists, because they have the most developed institutions in an academic sense, in research institutes, and gradually redressing that kind of balance and getting a more developing country perspective is something that’s happening. It’s going to take a while to do it, it’s a gradual process, but I think we’re moving in that direction.
RH: So we need in some way to globalise the International Energy Agency to take it out of the hands solely of rich countries and have it take a different look at energy needs for the world?
JS: The International Energy Agency is an interesting body, because obviously it has a history, it goes right back to that period of the 1970s we talked about and basically it was a consumer’s club where people ganged up together to protect themselves against a monopolistic oil supply and it’s gradually developed new kinds of roles.
RH: But it’s a rich country’s club at the moment, mainly?
JS: Yeah, it is changing quite a lot. What I would say is that it’s increasingly beginning to bring the emerging economies, say like China, into it. IEA, because of its constitution can only involve OECD countries, because it falls under the OECD umbrella, but it’s increasingly straining against that leash, because of the perceived need to address a wider range of countries to fulfil its wider mission and it’s now paying a lot more attention to research and development, to innovation, to the climate change agenda, on top of the original mission to look after security of supply, so it’s –
RH: So things are changing –
JS: But I don’t think it is yet moving in the direction of involving the low income countries and I wouldn’t include countries like China in that category, where this rapid growth is taking place, emerging middle-class, etc.
RH: Surely that is a mistake, because there was the report out recently, the Calderón Report, a follow-up to Nick Stern’s report into climate economics, making it really clear that we are only going to solve climate change if we have new forms of development in countries in the South, so that’s exactly where the emphasis needs to go and the great global think tank, the IEA, is not looking there. Perhaps it’s time for a new mission for it?
JS: I don’t really think that you can push institutions too far outside their mission. IEA was set up for a purpose and if you were to consider other development goals, I think I would put my emphasis on other institutions, more UN-type of institutions, World Bank, etc., rather than the International Energy Agency to do it, because I don’t think at the moment it’s got the skills, the mission, to take it in that direction. It’s not the only body around the system, there are many other multi-lateral bodies that might be a better location for pushing that development agenda.
RH: Do you think it’s an issue that needs addressing?
JS: The general issue of it increasing attention to development absolutely, I’m not sure I think the International Energy Agency is the vehicle to pursue that.
RH: OK, we were talking about solar a moment ago, can I take you back to solar, there has been this extraordinary price drop, 70% in what is it, 4 years or something like that for the cost of panels, although not of course for the cost of the installation which is a different issue, how far and how fast do you think solar can go. IEA, I think, were predicting 50% of solar by 2050, is that realistic?
JS: Yeah, that’s quite probable. It’s worthwhile mentioning I would now regard the standard photovoltaic panel as pretty mature technology, it’s based on crystalline silicone; there are other technologies or approaches to PV that are in the laboratory that could actually take us much further, so I think in terms of standard solar technology we will creep incrementally down the cost curve. But there are prospects for other things that could allow much greater efficiencies of solar cells in the long-term that needs more R&D, needs more innovation. And I think if some of these more advanced technologies come through, you could actually see more substantial drops in prices in the future, but we’re not there yet, we need more research, we need more innovation, demonstration projects, to take that through.
RH: Can I press you on the speculation on the ability of solar to make a real impact?
JS: There are two renewable technologies that can be globally ubiquitous, solar is one and wind is the other; wind because it’s mechanical, we can understand the issues and direction in which you need to go and you can probably say roughly what the limits are; with solar energy I think the prospects are much more speculative, much more unknown, so there is a huge potential for quite spectacular success, but that’s not in the bag, we can’t actually count on it at the moment, but it may be the technology that has the widest impact globally.
RH: You don’t want to bet on it though?
JS: I wouldn’t bet it on it, absolutely, that’s one thing in energy research, the cliché is there’s no silver bullet and I would be spreading my R&D investments across a range of technologies at the moment, because we don’t know quite where we’re going to be. A lot of countries have fossil fuels, so I wouldn’t take Carbon Capture and Storage for example, out of the R&D and the innovation mix either, I would be spreading it. But rather than picking winners, frankly, I’d be picking losers and deciding which technologies have reached the end of the line and take them out of the portfolio rather than thinking this is the answer, this is the one solution.
RH: OK, so what are the losers?
JS: I’m quite worried about wave energy, for example - there’s been a lot of money ploughed into it in the past. We’re still no closer to having a commercially operating device. The question of the fusion energy investment is another one that we’ve spent a lot of time putting money into and we never appear to get closer to that moment of commercialisation, They need a hard look, I’m not saying I would shut them down instantly, but we need to take a hard look at these things, to see where the value of the money is.
RH: There was a very critical report recently into ITER, the European fusion project, but it looked like MEPs might pull funding from it, but eventually they didn’t and of course it’s one of those things, surely, where everybody’s invested so much that nobody can pull the plug?
RH: I think they’re talking about… it used to be 30 years ahead and now it’s 40 years and then… or maybe now it’s 60 years or something?
JS: I think the problem with fusion if you were to wind back the clock, 30 years to the last cycle, the claim would be that fusion was clean energy that would be available for the future, but now that we’re starting to set decarbonisation targets for 2030 for the electricity sector, which is long before you could ever expect fusion to deliver power to the system, not only does fusion have to work and be clean, it’s got to work, be clean and be cheaper than the other options. So fusion now faces a bigger challenge than it ever has done, It’s got to address that cost factor as well as all the other ones.
RH: What is deterring you from wanting to pull the plug on it tomorrow?
JS: One reason is that in Britain we’ve tended to look at fusion very much through a kind of impact energy sector lens, in many countries fusion does not come out of the energy budget; it comes out of the science budget in general, because it’s perceived as advancing science in general. And you could maybe justify continuing to invest money in these terms as long as you understand it is a scientific project rather than energy technology investment that’s getting close to market, because that is certainly not the case at the moment.
RH: So you might get some speculative gains in fission, nuclear fission technology through the fusion research, for instance?
JS: Yeah, you mean all the overspill arguments, when you run these big projects you learn how to do other things.
RH: You might get a non-stick frying pan!
JS: Exactly, if we haven’t had it already, yes, that’s right!
RH: OK, let’s look at other technologies, you mentioned wind, what’s the situation do you think for onshore wind, costs continuing to creep down just bit by bit as –
JS: Costs continuing to creep down as you learn how to do things better. For example you need braking systems in wind turbines to cope with the wind gets too high. Basically the wind sector developed its own braking technology, now as it becomes a major industry you’re finding that people who perhaps have automotive interests who have better insights on how to develop braking systems are bringing things across from other sectors into the wind sector. That is not going to produce radical reductions in costs, but you’re going to come down the cost curve gradually, certainly with wind, and in some parts of the world wind is going to be cost-competitive with the standard alternative fossil fuel generation, especially if you have a carbon price that’s added into the picture as well. And a technology neutral carbon price could easily result in wind and certainly solar being cost-competitive in some parts of the world. Obviously renewable energy depends on the local environmental resource, so it’s going to work in some parts of the world and not in others, but there are clearly places where these renewable technologies wash their own face commercially now anyway.
RH: What about offshore wind which is so much more expensive than onshore wind, although politically less contentious, we haven’t seen huge decreases in price in offshore wind, because we’ve used up the good sites, we have to go into deeper water, it pushes up the cost, so as we learn, we also face extra costs?
JS: I think the cost reduction potential for offshore wind is very much larger. At the moment people have had the idea that the way we do offshore wind, we take it essentially into shallow-ish seas and we stick an onshore wind turbine on the seabed and that’s effectively what we’ve done. There are other ways of doing it and you can see ways of getting the costs down by changing the foundations, using the kind of structures that we’ve used for offshore oil and gas development, rather than the single monopole structure. There’s a lot of interest in floating wind turbines in different parts of the world that are anchored in different ways. So offshore wind technology is one where you could actually see bigger jumps in the future, because there might be more fundamentally better ways of doing it, but it is worthwhile saying in the auctions that took place recently in the UK for the feed-in tariffs, offshore wind came in at a price that was much lower than was expected and that was the kind of indication that you know if you design these processes cleverly and I think the auction process was actually quite well designed, it discovers what the real costs are and prevents companies that may have a kind of monopoly supply over the wind turbine equipment gaining quite high profits off it, it takes away their profits and gives the benefit to the consumer, which is a jolly good thing.
RH: So the UK is among the leaders in the world in trying to work out how to fix a system like this, we’re kind of making it up as we go along, how successful is it, do you think?
JS: I think we are quite successful. If I can just mention that I’m associated with the Energy Institute, which is conducting now an annual survey of its members around various issues and I think the consensus among the people at the Energy Institute surveyed is that the electricity market reform process in the UK has been on the whole pretty successful. People held their breath for a long time but now that we’ve had these auctions for the renewable energy technologies people are actually feeling a bit more optimistic and, ‘Oh, we can’t believe it, this thing has kind of worked, we’ve got the costs down,’ people are coming through.
RH: Let’s touch on another technology which you mentioned earlier, which is carbon capture and storage, where you take the CO2 from conventional fossil fuels and you pump it underground into rocks or into saline aquifers, I spoke to your colleague on the IPCC, Sally Benson, who is the IPCC’s lead on CCS, she said when she first heard about carbon capture and storage being promoted she thought, ‘Actually this looks a really interesting idea and you know, probably we might start seeing it happen in 40 years or so.’ And then almost immediately she started hearing politicians talking about it as a solution for now, and she wonders whether by the time we’ve got carbon capture and storage sorted, if it ever happens, that we’ll actually be at the stage where we need zero carbon technologies, not low carbon technologies like CCS, which of course still involves some CO2 output. What are you thinking about CCS?
JS: I think my position would be sort of probably midway between Sally’s position and perhaps the optimism that existed about CCS maybe five or six years ago. We understand basically the kind of science around CCS, we know the problem that needs to be fixed, it’s a kind of engineering, problem-solving issue that we need to go at it and it will need some iterations and attempts and some demonstration to put it in place. I don’t think it will take 40 years to do that, the UK is looking to try and put in place two very large scale demonstration projects and get the contracts signed in the next year or so, so I think we’re a big closer than the 40 year timescale.
RH: To be fair to Sally this was 40 years from when she first heard about it being discussed.
JS: Right, and since I first heard about CCS about 30 years ago, that’s probably not so far off!
RH: OK we’re getting there.
JS: Yeah, yeah, we could potentially see by 2030 a credible number of demonstration projects beginning to come through. I think one of the challenges will be there has been a rule of thumb that everybody has used that you can get 90% of the carbon dioxide out of the flue gas streams and it’s become one of these numbers that’s become locked into all the assumptions without the engineering evidence to justify it and I think one of the key challenges when we are demonstrating this technology and there’s lessons from other ones like flue gas desulphurisation and acid rain, it takes some time to build up the reliability and the efficiency of equipment as people learn the lessons about how to do it, so it would not surprise me if early projects, the equipment spends a lot of time offline for maintenance, because some probably needs fixed or that the recovery efficiency is less than 90% because people are still learning the tricks from it. You can probably get to 90%-plus in the long, long-term, but I doubt if you’re going to be there in the early stages.
RH: I can’t imagine Greenpeace being very patient if the CCS flagship plants get shut down for a month at a time.
JS: That’s what will happen for new technologies, you cannot start with something new like this and expect it to run perfectly, this is not like the x-millionth Toyota Auris that’s come off the production line that’s fine-tuned, this is back to Henry Ford’s days and the Model T, you know, when things were less reliable, you’re learning how to do things.
RH: And obviously we still have all those fossil fuels that are waiting there to be burned, there are various numbers around about how much of the fossil fuels we’ve already found that we can afford to burn. Shell insist that they still need to explore in the Arctic or wherever it might be in order to find fossil fuels which will still be needed even within the IPCC’s 2ᵒ scenario. I’m trying to bottom this out, I mean, what’s your view on that?
JS: I haven’t bottomed this out myself, this issue of how much oil is burnable. There’s a very big distinction between the reserves that oil companies hold which are things that you have to demonstrate to your shareholders, that’s part of the capital asset and the value of your company and these things are regulated very strictly by bodies like the Securities and Exchange Commission in the US and as a result of that reserve estimates tend to be fairly conservative.
RH: Except for the mistake from Shell a couple of years ago?
JS: Yes indeed and that’s the reason why many companies are more cautious now than they were before Shell’s unfortunate collision with the SEC. But there is difference between that and resources which is more of a hunch about what is underground that you do by interpolating from the geological knowledge that you have. And what I frankly don’t understand and I think a bit more independent work is needed on, is where that gap is between the conservative estimates of reserves, the actual resources that are sitting under the ground that could potentially be taken out, and where that fits in with the so-called carbon budgets that people have estimated using the evidence from the IPCC reports. You’ve asked me, you say you’d like to bottom it out, I would like to bottom it out too, because I genuinely don’t understand, I haven’t got into the numbers and somebody needs to do it in a little more detail.
RH: It’s a critical question, isn’t it?
JS: It is –
RH: It is a really big knowledge gap and we don’t know who to believe on this.
JS: It’s a question that is really worthwhile asking and I think it is a priority for somebody to go into a little bit more depth into these issues to understand the reserves, the resources, the other parts of it. I know there was the paper by my colleagues Paul Ekins and Christophe McGlade that was published in Nature that looked at the unburnable fossil fuel issue.
RH: They said 80% of coal that we have already can’t be burnt, 50% of gas can’t be burnt, 30% of oil can’t be burnt.
JS: And what I would like to do is to poke that one, because they used one model and there are 20, 25 different models round the world that work in the same area, trying to resolve that problem that may produce different answers on that. Their model also makes the assumption that you start with the cheapest coal, oil and gas resources, use these, and leave the more expensive ones in the ground.
RH: Isn’t that rational?
JS: It would be rational except it doesn’t characterise current oil markets certainly, where you have a lot of monopoly power that’s potentially available for people to exercise, so I think again there’s a lot of issues I would like to tease out about what the very imperfect market structures round energy means, for which oil and gas and coal would stay in the ground and which would not, because one thing I would absolutely perfectly forecast, it won’t follow a perfect cost curve.
RH: So we can’t know yet whether Shell are right when they say that they can explore in the Arctic and still find gas or oil that will allow them to stay within the two degree scenario?
JS: I don’t know the answer myself and I have not seen the independent analysis that would allow me to unpick it and I think that work should be done.
RH: I feel almost embarrassed sitting in your office taking your time, you should be beavering away …
JS: Absolutely right –
RH: It’s probably easier talking to me!
JS: Well I do actually have some students who are starting to crawl over all the modelling outputs that have been conducted over the last five years or so to see what the overall picture looks like, but I think the other question is what reserves do the big companies actually hold on their books? And the other issue then is that many of the national oil corporations, you know Saudi Aramco, the Middle Eastern national oil corporations, do not reveal what their reserves are.
RH: But they own the majority of the world’s reserves by far, the national oil companies –
JS: I would have expected that that would be the case, yeah.
RH: OK, let me ask you about the UK. We have a new Secretary of State, we’re facing all sorts of challenges, where should she start, where’s the simplest and easiest place for her to really impact on energy?
JS: Yeah, we’re increasingly trying to pursue this balance between pursuing the environmental climate change agenda, making sure energy is affordable and making sure supplies are secure and the thing that really shines through, that ticks all the boxes all at once, is the pursuit of energy efficiency and there is still so much opportunity around given that our existing housing stock and commercial buildings are so thermally inefficient, there is so much low-hanging fruit there that would reduce costs for consumers, would do good things for climate change, would make us less dependent on internationally traded energy products, it’s a very obvious way to go.
RH: So that should be her number one priority, reduce demand rather than increase supply?
JS: I would say that was the number one priority and it’s a bit of a shame, because I think the last government did actually manage to lose a bit of momentum on the energy efficiency side of it, some of the very low cost options like investing in cavity wall insulation, loft insulation, we lost momentum on the rate of production… the rate of installation fell, and trying to redress that balance and actually pick that low-hanging fruit again, because there’s lots of it there, would be the priority area for me.
RH: I went to Unilever this week, they’re very proud of their carbon savings, massive carbon savings they’re making, but the payback period for carbon savings is three years, so they put in new energy efficiency things, they pay back in three years, that’s an extraordinary payback and then they’re quids in from three years in.
JS: We’ve got interest rates as low as they are at the moment, there’s a very strong economic signal that all this energy efficiency stuff is going to pay the country off very handsomely. You say three years for Unilever, I mean that’s a standard capital rationing you take on for discretionary projects. There are many projects that would probably have a much lower return period that that, less than a year, perhaps, in some cases, we may be passing up at the moment.
RH: I’m not sure if you have an insight into this, but the government rejected a move from Europe to have mandatory energy efficiency standards or energy efficiency targets as part of our general targets within the EU on climate change, the UK government consistently rejects mandatory targets, is that because they’re from Europe or is it because there are forces within the department who want to increase supply, not to reduce demand, have you any idea where that comes from politically?
JS: It’s a very interesting issue, because there’s a kind of tension in energy policy between people who would like very technology neutral signals sent, mainly by pricing and the operation of markets.
RH: Who put on a carbon price and let the market sort it out?
JS: Who put on a carbon price and let the market sort it out versus measures that are much more detailed, much more specific, which take place in the form of regulation. It’s very interesting, when the IPCC reviewed the current policy set that is used globally it was pretty much of the conclusion that in spite of any theoretical benefits from these sort of general market-wide, country-wide measures like carbon pricing, in practise the instruments of choice globally had tended to be the specific, the regulatory, the feed-in tariffs, etc., that were developing specific technologies and for many countries that’s the most attractive way to do it. And actually regulations can be quite an efficient way of getting over many of the barriers in say energy efficiency markets, because consumers don’t have the detailed information to make the kind of rational choices, they’re too busy to spend time doing all the research into it and frankly having a regulation or a standard, just cuts through the crap basically and allows people to make the right kind of decision.
RH: The government did have their Green Deal, I got involved in it personally recently when I had a leaflet through my door saying, ‘Ring up this person and make your home more energy efficient,’ and my home’s not bad at the moment, it’s not brilliant, an old, Victorian house, but it’s not bad, I’ve done quite a lot and I thought, ‘I’ll ring this guy up anyway.’ So I rang him up and he talked me through and he said, ‘You’ve kind of done everything, really what would be effective would be to put in secondary double glazing.’ And I said, ‘That’s just incredibly expensive,’ and he said, ‘But you can get it through the Green Deal, you get a massive discount if you get it through the Green Deal.’ So I said, ‘How do I do that?’ So he said, ‘Here’s a list of suppliers here on this web link here.’ So I went to the URL, looked at the list of suppliers and you have to phone them up and he said, ‘You just phone up and find out somebody who’ll fit secondary double glazing in London.’ I went through the list, there wasn’t one. So I’d been all the whole process of going through government advice, a government funded advisor pointed me to something that isn’t there.
JS: Yeah. I mentioned the Energy Institute has conducted this survey of its members which has included questions about what they think has worked and hasn’t worked and the Green Deal I have to say is probably top of the list for things that people think has not been, on the whole, a successful policy initiative. Personally I wouldn’t throw the baby away with the bath water when it comes to the Green Deal, because I think a lot of the challenge of moving energy efficiency is actually building up the supply chains, all the smaller companies, the micro-enterprises that put insulation in, that develop the measures, and giving people the confidence they can actually go to companies and trust them is quite important. So building up these supply chains, accrediting decent suppliers, I think is something that the Green Deal has started to do, is something that we should continue to do in the future. It’s never going to be perfect, but I think that that part of the Green Deal is broadly moving in the right direction. I think the problem has been the financial model behind the Green Deal, because frankly if you offer people interest rates of 7 or 8% or whatever it is under the Green Deal to install energy efficiency measures, why when current interest rates are much, much lower, people with an offset mortgage can borrow money at 2% maybe at the moment, why would they ever follow the Green Deal financial model and if that was available to them beforehand why didn’t they do it in the first place? So I think you know, some thinking round more of the financial aspects of the Green Deal, some re-thinking is really quite important.
RH: This government and indeed Labour, if they’d been elected, were both committed very heavily to infrastructure, major infrastructure spending. Some people argue that energy efficiency should be on the top priority of infrastructure spending, because it saves so much money and brings so much social benefit and also creates so many jobs, because each house, you have a team of workers going in to do the work, you can’t do it with big machines like building a motorway.
JS: Yeah, I mean, it is very interesting, I live in a block of flats in central London and frankly everybody has their separate electricity and gas supplier within that building, so there are real obstacles in some parts of the country to neighbourhood level solutions because of that diversity of supply and I do think there needs to be some imaginative, institutional approaches, more area-based approaches or whatever to try to get energy efficiency through, because there are big economies of scale from sweeping through areas and doing everything all at once rather than picking one dwelling, one flat, everybody doing it differently, there are huge costs associated with trying to do it that way.
RH: Do you have a message to the new Energy Secretary Amber Rudd about scrapping subsidies for onshore wind, which you’ve already said is the cheapest form of readily available renewable energy?
JS: I think my view on onshore wind is that if you put in place a credible price for carbon, onshore wind would pretty much be washing its face in comparison with alternative technologies. The problem is that we do not actually have a credible carbon price through the EU emission trading scheme and therefore if you were to take account of carbon pricing by proxy through other measures, you know, some level of subsidy for onshore wind would still be justified. And I think the question with onshore wind is the question of local acceptability, which is obviously a legitimate issue, but there’s a lot of diversity around the country for example, Scotland is ploughing its way through with you know investment in onshore wind at the moment and I think we need to take account of that diversity. It is the cheapest renewable option at the moment, we can understand that there may be local objections in some places. I’m a little bit sceptical that we discard one of the lowest cost options and take it out of the portfolio.
RH: Only a little bit sceptical?
JS: OK, I’ll amplify it!
RH: Let me ask you questions, because you have been close to government, you’re on the Committee on Climate Change, you’ve worked closely with government, how do you feel about the syndrome which has developed over a number of years now in which civil service numbers are rather small and government’s trying to save money, so people come into the department on secondment from major energy companies and then go back to jobs in the major energy companies, so it’s kind of a revolving door, they come on loan, how does that influence policy, do you think and is it a good idea?
JS: I don’t think it influences the way things operate in a very direct way, but what it introduces is a kind of culture, a shared view of the world perhaps, between government and the companies that are active in the energy markets. Now because of the way the civil service operates, I actually feel quite positive about bringing domain expertise, into the civil service to help civil servants move the process through and help them develop –
RH: Do you think the culture is strong enough to resist –
JS: That’s the interesting question and that’s obviously the question I don’t know, because I don’t know how people who are seconded are deployed within the department, whether they sit there in a kind of advisory role, which I think is probably a positive thing, because their technical knowledge would matter, or whether it’s a more decisive role in deciding which options are presented to ministers. So that’s a question of detail about how the culture actually operates. It has to be said there are actually examples say, for people from the environmental NGO movement have been seconded into government to do things as well, so it doesn’t always work in that direction, there are other kinds of secondments as well and because people tend to move jobs fairly quickly in the civil service sometimes people have to get up to speed very quickly. I actually do think having access to technical advice is on the whole quite positive; it depends how that advice is actually managed and whether it remains advice or whether it becomes part of the executive process.
RH: Another thing the government will have to deal with is intermittency and making the grid capable of dealing with the renewables, how well are we dealing with this issue, do you think?
JS: I think the big interconnector that’s joining up Scotland and England under the sea is a really positive example you know real efforts are being made to do that, I think we’re moving ahead. One thing that’s probably less fashionable to say, but I think the greater level of interconnection with Europe, for example, the lines to Belgium, Netherlands, France, are helping to improve energy security. If we get a line to Norway that will be another one that will help backup the onshore and offshore wind in the UK as you use the pump storage facility in Norway, effectively. So infrastructure is both building up the robustness of the grid in the UK, which we are making progress on, but also I think that wider interconnection internationally is also going to help us.
RH: What about storage, so an area like Cornwall, for instance, is in energy surplus in the summer on a windy, sunny day, shouldn’t they be trying to improve their own local storage so that we don’t have to strengthen all the grids to deal with all that extra power flowing?
JS: The question of stability of electricity supply, there are many different ways of actually addressing it and storage is one part of the solution, but there are other ones as well, like for example having more demand responsiveness is quite important. The ability of people on the demand side to pull back when supplies are getting tight is probably as important as storage at the moment and that’s part of the bigger picture of getting energy demand to play a bigger part in the thinking about how the energy system actually operates as we move towards more low carbon we’re looking at an energy system that is much more interconnected and we really do need a focus on systems thinking about how the different parts of energy fit together, rather than thinking, ‘Here’s one technology, we’ll plug it in and that will provide all the solutions.’ So getting stability on the grid is a mixture of storage, it’s demand side response, getting the right kind of signals to build plant in the right places and it’s systems, thinking about how all that fits together, that, I think, is the key, rather than focussing on one particular thing.
RH: The government did have an opportunity recently where it auctioned capacity permits, a very, very small percentage of that went to demand response, do you think that was the right solution?
JS: I actually support the idea of capacity markets, they make a lot of sense if we move towards low carbon energy which is intermittent, you’re not going to get the price signals when supply gets tight, so I think the principle of a capacity market is a good one. I mean, I was surprised by the low prices when they came out; in retrospect I can understand how we got there, because perhaps supplies weren’t as tight as we really thought they were and that’s what the auction actually revealed and why the prices got so low. And I have never felt quite the level of anxiety about security of supply that might have been evident from some public debate. I think the question will be will prices for capacity rise in the future, I would expect that to happen as we get more renewable energy in the system and at that point you would get more demand side response. The difficulty is for demand side that the value of demand side is… it manifestly adds up and makes sense, but the benefits are spread across all sorts of different places and different markets and it’s very difficult to put these different value propositions together and get something that counts, so there’s some value in a capacity market, there’s some value in frequency of response, very short-term stuff, short-term operational reserve, again demand side can play into that, but at the moment anybody has to play in five or six different places to collect all the value together and we are missing opportunities by not aggregating these different opportunities together. And it’s another example of where you need systems thinking to try and put it all in place, because demand side would really be valuable, would really play a role in the energy system, but the benefits for anybody who wants to participate are so fragmented, you can’t realise the benefits.
RH: OK, so we’ve talked for a while, it’s clear to anybody listening that this is an incredibly complex issue, nationally, locally, regionally, in terms of the targets we’re facing with carbon targets, the uncertainty over them, the uncertainty of exactly how the climate will respond. You know all these challenges, it’s your day-to-day business, are you optimistic about the future?
JS: I think I probably am, I think you know in terms of things like the carbon challenge, I think almost everybody is going to be disappointed in the sense that I think there is a real inconsistency just progressing with business as usual on the fossil fuel side, I genuinely don’t think it’s sustainable, because if we continue the way we are globally, it will start to undermine economic growth, economic activity, in ways that will undermine the demand forecasts on which the fossil fuel supply propositions are based. On the other hand it may be that some of the environmental ambitions around climate change are just unrealistically high at the moment and I expect there will be a muddle through solution somewhere in the middle that keeps almost nobody satisfied. But I am optimistic, the lights haven’t gone out in Britain for a long time and the only reason anything has ever happened is usually because of issues in the UK like tanker driver strikes and miners’ strikes, etc., it’s not been global apocalypse that’s turned the lights off, so in that sense I’m actually quite optimistic.
RH: So you’re optimistic about keeping the lights on, are you optimistic about the state of the planet for your grandchildren?
JS: I think they are going to need to deal with a warmer planet and it would not surprise me if the planet that they have to live in is a planet that lives in a zone that the Framework Convention on Climate Change has defined as a dangerous one. That, I fear, will be one of the outcomes.
RH: That the world just simply can’t respond to the challenge fast enough, that the vested interest incumbency is so strong, we’re set in a paradigm and we can’t shift?
JS: Let me just say that one thing that I think we need to beware of is an over-focus on the 2ᵒ as a target and the idea that 1.9 is heaven and 2.1ᵒ increase you know we’ve lost the battle and we should all give up, that’s not the case. The response to climate change at a planetary level is gradual, there may be points at where things go very badly, but I don’t think we’re there yet, so even if we fail to put in place commitments in Paris at the end of the year that reach 2ᵒ, every little bit of mitigation effort is going to be worthwhile. And as the IPCC Report said last time, we can’t ignore the adaptation outside as well, we are now committed to a lot of climate change, we need to both mitigate and adapt in the future and obviously the balance depends on the kind of commitments countries can come up with, but we’re undoubtedly going to have to do both.
RH: It could be that under your muddle-through scenario that that might be an ideal scenario, if you take arguments advanced by an organisational like the Global Warming Policy Foundation, a pressure group proposing continued use of fossil fuels, they think that as the century progresses we will get richer, we will be able to afford new solutions, new technologies will improve, prices will come down and maybe the climate won’t be as sensitive as we think, so maybe the muddle through is actually ideally what the world needs?
JS: The scenario you just described there was slightly more than muddle through, because it involved a sense of optimism about whether scientifically the response of the planet to the forcing from emission levels was at the more benign end of the spectrum, so that’s not really a muddle-through scenario, I would still want to think about the other end of the spectrum, I would want to think about the risks at the higher end of the climate response, rather than ‘cross our fingers,’ - the Micawber approach to climate policy - that something will turn up and save us - is one that I’m not really very happy with, cross the fingers and maybe the response of the planet will be lower, maybe technologies will come through, that’s not prudent planning from the future and it’s not the way that I would actually do it. So I think we need press on and make progress with mitigation, it involves the diversity of things, it involves investing in new technologies for the future, but it involves doing things now, because putting in place new technologies now, helps with learning, bringing the costs down that will bring benefits in the longer term. And the other point of course is that the effect of carbon dioxide emissions is cumulative, every extra ton you put into the atmosphere we’re going to have to live with for hundreds of years, so acting early is really quite important.
RH: Jim Skea, thank you very much.
<End of Interview>