The UK’s plan to operate a clean power system by 2030 (dubbed CP2030) relies heavily on the supply chain. New Power spoke to Matthew Knight, head of policy and markets at Siemens Energy, about whether the UK is an attractive customer in a seller’s market.
Is the UK an attractive customer for the global electricity supply chain? It is just one among many countries who are transitioning their electricity sectors from fossil fuels to renewables, and are faced with reconfiguring and expanding networks as a result.
When I talk about this issue with Matthew Knight, head of policy and markets at Siemens Energy, he agrees the UK’s CP2030 transition “is happening against a backdrop where global demand [for grid technology] is growing.” He puts growth at about 18% per year for the last couple of years and says it is likely to be similar for the next couple of years. “So if there was 20% spare in the global supply chain last year, it is all used up this year and it is going to be short next year.” That means, “It is important for the UK to be able to buy in bulk and be attractive to get the bit of the supply chain it needs.”
Other countries have seen this coming. “Two years ago [Dutch and German transmission operator] Tennet signed a ten year deal for HVDC. That really tied up a lot of the resource – so much so, that it caused some offshore wind developers to look at AC rather than DC [connections] just to be able to get access to the supply chain.”
some offshore wind developers look at AC rather than DC [connections] just to be able to get access to the supply chain.
The good news for the UK is that “Generally the confidence of the supply chain in the pipeline of work from the UK is stronger than it has been”. And that is because “for the first time in 35 years, we actually have a plan.”
The government’s ‘Clean Power 2030’ action plan and so-called ‘Mission Control’ provide clarity on direction and a single routemap – a marked change from recent years, when the system operator used a variety of future energy scenarios .
He says “having the really ambitious plan is very helpful. I’ve said for years that the first prerequisite for the supply chain to invest in anything, whether it is training an apprentice or building a new factory, is confidence in a pipeline of work that we have a chance of winning”.
He is hoping for a “bumper” allocation round for new renewables projects this year. But in fact, “What would probably be best for the supply chain is delivery at a steady rate well into the 2030s.”
Without that pacing there is a delivery risk. He notes there are 88 network projects in the current action plan and “the risk is that they all hit the supply chain at the same time. We have moved from a world where we don’t know what is going to happen, to one where we don’t know precisely what is going to happen but we know it is going to be quite a lot and we may not be able to cope with it.”
With the recent Early Procurement Mechanism Ofgem has given network companies the ability to secure equipment earlier, but Knight says the need to expand the workforce is equally challenging: “We can find ways of extending factory capacity, but it is very difficult to train a senior project engineer – you can’t do that overnight”.
We can find ways of extending factory capacity, but it is very difficult to train a senior project engineer – you can’t do that overnight
He says, “We need a comprehensive workforce strategy”. That means ‘selling’ a career in the industry to recruit people, but he adds, “once we have recruited these people we need to train them. We need to invest in more training centres and more training people and n the best way to do that is to do it across the whole industry. One company can’t do this on their own: we can train someone and then they get poached by someone else”.
He adds, “Once we have trained them, we need to set them to work on sites and they will go up a learning curve in the real world. So you need experienced people next to them, and you need to allow extra working hours on sites so people can get up to speed and learn.” Again, that requires a ‘whole industry’ approach – including the regulator, who has to allow for the fact that people on their sites will be training new staff and therefore need extra hours.
He says, “Last year we did about 600,000 hours on site, in two years time we are already forecasting over a million hours. So that’s the scale that our workforce has to grow and it is probably typical of the whole industry. This is not incremental growth, this is doubling or tripling and in particular skills that can be really challenging.” He illustrates the challenge in securing experienced staff: “of the 150 odd people recruited in the grid team in the last year, 46% were from overseas. That’s not because they are cheaper – they are more expensive and it is much harder to bring people in from outside than use local people. But we cannot find local people.”
He adds, “because grid in particular is booming around the world we can’t rely on a stream of people from overseas. We have to grow our own.”
Electricity is first in decarbonisation
Speaking more broadly about Net Zero, Knight says that “It’s an exciting thing, the idea that electricity goes first. Then the offer to the rest of the economy is that you plug in and go green. If we have a 95% decarbonised electricity system, switching your home heating to a heat pump or your driving to an electric vehicle is the obvious thing to decarbonise heat and transport.”
In contrast to his excitement over green electricity, when I ask Knight whether an alternate vector – hydrogen – is past the early ‘hype’ period, he says “I hope so”. He explains: “The fundamental physics of hydrogen remains: it’s never going to be a cheap fuel, so therefore we should use hydrogen for the things where it has real value. The last thing we should be doing with it is burning it for low grade heat, especially not when heat pumps work better.”
He says, “There are a few things that you really need to use hydrogen for. That is replacing it as a chemical, niche particular high-temperature industrial stuff and a bit of transport – but we aren’t talking about road transport, more marine and aviation.”
The fundamental physics of hydrogen remains: it’s never going to be a cheap fuel
He adds, “The big thing we need hydrogen for is storing renewable electricity. Every country is different and its path to clean energy is different. If you are in North Africa or the Middle East, you have reliable solar every day” so with battery storage you can cover green electricity needs. In contrast, the UK’s assets are shallow seas and strong winds “and that means you have to have enough energy stored for the one period in ten years when the wind doesn’t blow for a week”.
Up to now, we had that storage ‘by accident’ from gas reserves in the North Sea. That and our Norwegian supply will soon both be in decline, so “The future of gas supply in this country is going to be increasingly LNG imports. Then you really are relying on other countries around the world being willing to sell it to you, and being able to afford the price that they are prepared to charge you.” Hydrogen from renewables can alleviate that dependence.
This is important in connection with Knight’s view that we are moving to a different energy era. He says that politicians talk about Net Zero as a cost rather than an investment: “they often miss the fact that we have an awful lot that we have to catch up on.” What is more, they compare the future with the past, rather than an alternative future. “The alternative futures for the UK are either a future that is dominated by wind and some energy storage, and clean, or a future that is dominated by importing LNG from whichever country that is prepared to sell it to us that is going to be incredibly expensive and not so secure.”
The danger in making the wrong comparison is, “Unfortunately, while we have greater clarity on direction, we have lost the [political] consensus”. Until recently parties had the same end point in view (ie Net Zero), with discussion over the speed of change. But Reform, for example, takes a different view. So, “there is a different type of risk creeping in, particularly if you are looking at a long term investment. What if the government changed and what would their view be?”
Going back to the current ‘sellers’ market’ for the electricity industry supply chain, he reiterates that uncertainty is costly, because “Confidence gets built over time when stuff happens the way you were expecting and politicians repeat the same things, and it can be damaged overnight”.
Knight can list real-world examples of the need for confidence. He says Siemens Energy has designed and built the world’s first 100% hydrogen turbine, at its Lincoln site but , “We had to take it to France to test it because we couldn’t find a project here to test it”.
He adds, “We signed an agreement with SSE to build the world’s first large scale hydrogen -fuelled plant at Keadby”. For Siemens Energy it means “tens of millions of pounds in investment and upgrading our test facilities”. Ideally it will be built by 2030, which means SSE will probably have to take an investment decision next year. For that to happen the right policy has to be in place to ensure there is a viable business model. It has to be a collaboration between industry, our customers, government and the regulator.
it’s going to happen and no-one ever saved money by slowing a project down
He says that is all very do-able – if confidence is there.
He adds “We can’t do it any faster than this and we shouldn’t do it any slower”. “The energy transition is unstoppable, and looking back on his early days as a project manager, he says the only way option is to go as fast as we can: “it’s going to happen and no-one ever saved money by slowing a project down”.