Happy Christmas to all our readers. To celebrate the start of 2020 we present 12 interviews previously only available to our subscribers.
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Engineering union Prospect’s senior deputy general secretary Sue Ferns has to consider the future for thousands of members working across the energy industry. They want future visibility for their careers as much as companies do for their investments, she says. But most are faced with more stress and more cost-cutting. In an interview published in the September 2019 issue of New Power Report she tells Janet Wood we must invest to meet our net zero goal
When I ask Sue Ferns, senior deputy general secretary at Prospect union, for her view on UK energy policy, her response is to ask: “What is the energy policy?”
She, like other stakeholders, had been expecting a White Paper from the Department for Business, Energy & Industrial Strategy (BEIS). Instead, “we have just had this whole raft of consultation documents. Clearly the overarching narrative is the missing bit,” she says.
Prospect’s members are the industry’s managers and scientists. For them, at the moment, the narrative is one of uncertainty. “Our experience is of employers saying understandably that they are reluctant to invest without knowing what the long-term future looks like. The government has given some signals but employers I have spoken to since then say they still want a government statement to say this is where we are heading,” Ferns says.
Prospect welcomed the ‘net zero’ commitment and supports it. But Ferns asks: “What does that mean in engineering terms? What do we need to do? By when? And what does that pathway look like?”
Those questions have to be answered both from a systems and technology perspective, but alongside that, “what are the implications for the people and skills that are going to be needed compare to the skills we have now? What are the employment prospects going to look like?”
Ferns says that one important reason for more of a technical pathway is to be able to plan some of those other issues.
I ask her to assess the effect of the White Paper delay. “There is lots of uncertainty anyway, around Brexit and all of that. A lot of employers and investors were waiting for that firm commitment from government to give them the confidence to invest. The fact we haven’t got that is damaging. It feels like we have had a very long period of uncertainty,” she says.
“Clearly people making long-term investments – whether it is in hardware or people – want some certainty about what kind of return they will get.” Just as important, after recent volatile policy decisions, is that, “it’s not going to all change again or be withdrawn”.
As for how that ‘net zero’ power supply might look, she says the union supports the growth of renewables. But “the Committee on Climate Change and National Grid in the Future Energy Scenarios both see a balance … including a continuing role for nuclear, and that is very much where we are”.
One of those consultations that was published in lieu of the White Paper asked about whether nuclear should be funded as a regulated asset (RAB model). Ferns says: “Our view is that the most straightforward and probably cost-effective way would be for government to invest directly – however, we don’t see a realistic prospect of that. A regulatory asset base model is probably the answer, so we would like to see that go forward.”
Elsewhere in the power mix, Prospect thinks government’s effective ban on new onshore wind in England should change. “Onshore wind is cheaper than offshore wind so it makes sense to change the policy,” Ferns says.
Asked on what basis – whether underwritten by, for example, revenue stabilisation measures – Ferns says that with no onshore wind currently in play it is hard to test arguments about how it should be supported. Overall, she says the big question is: “What is the appropriate mix of public and private to incentivise and direct investment? We [Prospect] tend to be very pragmatic about that. Maybe there does need to be government investment there. I don’t know if there would be a market.”
For Prospect’s members on the fossil side of the industry, there is more uncertainty. Everyone has expected coal plant closures, and “been realistic about that” BEIS although Ferns thinks closures have been brought forward because of uncertainty around the Capacity Market. “For us, the issue is how do we use the skills and expertise of those people in other parts of the industry?”
But the Capacity Market suspension has created more uncertainty and concern in gas-fired plants. “Investment is being postponed and decisions are being taken about whether we continue to invest at all. What’s the future viability and is it going to be worth it in terms of the projected life of the assets?” asks Ferns.
Meanwhile, she notes: “I don’t see much interest in new-build gas at the moment.” Prospect’s view is that regardless of the recent suspension, the mechanism as a whole has not achieved its goal of bringing on more large gas plant, because it has never achieved the necessary price. And in the last couple of years, with the increasing role of interconnectors, prices have fallen still further.
Ferns notes that “particularly for heating, there has to be continued role for gas in the short-term”. But when it comes to the needs of heavy industry, she stresses the role for hydrogen and carbon capture, use and storage (CCUS) in deep decarbonisation. “Like every other union we would like to see a [local] supply chain for all parts of the renewables industry, so we would be manufacturing steel and cement and if we are going to do that in a low carbon way we need CCUS,” she says.
Cost versus investment
I have asked about support but Ferns says the language around the transition to net zero must change. People talk about the cost of nuclear but there are also support costs for renewables. “It is all expensive. But that’s not the issue. The issue is how do you make that happen and have stability enough to know that if you are going to make that investment either as a government or private developer there is going to be a long-term sustainable future for it.”
How important is it that it is a UK industry – and should the UK be focusing on hardware, like steel and cement, or knowledge industries? Ferns responds: “We need to be evolving our skills base … we want to see as much of that industry in the UK with UK skills and the UK workforce as we can.”
She refers with frustration to Scottish company Bifab, which has failed and had to lay off its workers at the same time Scottish wind farms are importing components for overseas. I ask whether we have to pay a premium for UK content but the union is concerned over a ‘race to the bottom’. It has stressed the economic value that is created, tax revenues, local investment and carbon savings. In holistic terms there is real value to locating work in the UK, says Ferns, and in the Bifab example “what is needed is investment in the yard”.
Building the skills base
The UK needs the skills base to be able to deliver projects and components. Although that has been a focus in offshore wind particularly, Ferns says there is more to be done.
“What we need is a better understanding of the skills required and the existing skills base. Some imports take place because there are established skilled workforce elsewhere. We have that, but what we see in renewables is not a sector-wide or strategic approach to skills development.
“It is about investing in the people and investing in the capability – there is more that should be done about that.” It also means increasing workforce diversity “All of the energy sectors are really poor in terms of their diversity.”
Who should pick up that challenge? “I think this is a blend of skills of policy and industrial strategy but I don’t know where this government is and what its approach is going to be,” Ferns says.
She points out that it is not just the technical roles that have to be filled: “There is a lot of risk involved, especially for small scale suppliers in committing resources to compete for a contract if you don’t know what is going to happen in two years time – let alone five years.” Just as it is very difficult to build a supply chain on that contract, it is very difficult to build a career in the sector if you are not sure where it is going.
“That’s one reason why there has to be a real industrial strategy – to give some idea of where the industry will be in 10 years,” she says. That applies to industry members too – including those in less obvious specialisms, such as traders or designers.
When it comes to roles like trading, writing power purchase agreement (PPA) contracts and other white collar roles, “it’s a relatively small pool of people who do that work. I’m not sure that what the succession is”, says Ferns.
“It’s partly a cultural thing. If you have that understanding and those financial skills it’s not obvious that you will work in an energy company. Lots of energy companies still have quite traditional old-fashioned cultures – you can see if you go to a trading department there is not quite an easy fit with the culture. That is something that needs more change.”
There is a huge need for digital skills, for example, but – back to the diversity issue – people with those skills don’t tend to see themselves in the industry.
I note that energy companies have worked hard to promote science takeup in schools but Ferns has some doubts about that: “I have no doubt [it] is important and there is a need for it, but I sometimes think they focus on that because it is easier than focusing on what they already have in the company and how they are utilising the people they already have in the organisation – whether they should be changing some of their employment practices or the recruitment or promotion. I think that is harder work than the good PR they can get for the STEM outreach.”
She adds: “They all parade their female apprentices every time there is a camera about, but once you’ve passed your apprenticeship what have [they] done about the career path? That is the bit that’s lacking – so that people want to stay.”
The shift to renewables has created fewer jobs than expected by almost a third, research by the union has found. We are not building as much as expected (and there has been a reduction over the last couple of years as subsidy schemes close) and the UK content has been lower than expected. There have also been changes such as automation and streamlining as the industry matures but that has been a relatively minor contributor. Ferms says some of that is a good thing: “You see more inspections being done by drone – that has to be better than people perilously going out.”
I suggest that in renewables, as elsewhere in the industry, there is a shift towards ‘knowledge’ jobs that do not attract politicians who want to have ‘hard hat’ photos. Ferns such photos are “part of the problem, because that perpetuates an image of the industry which doesn’t really tell you the story”.
The union is concerned about intense pressure on cost and its effect on safety culture. For example, in offshore wind projects competing for Contracts for Difference there is a lot of pressure to reduce costs and it fears that could be done in ways that could potentially have safety implications.
Ferns reiterates that it should not be a race to the bottom. “If we are going to achieve net zero there is going to be a cost and we shouldn’t be apologising for that.”
Who owns, who benefits?
Many of Prospect’s members work in energy networks, which are in the Labour Party’s sights for a return to public ownership. I ask whether that is the right approach.
Ferns says: “Ownership is portrayed politically as a very binary issue and actually it is bit more complicated than that. Our view is that government has to play a more active way role in many ways in the whole energy system, which can include more direct investment in it.
“But ownership is not where you start. The question is what you are trying to achieve and what is the best way to achieve it.
“In relation to the network companies, I can absolutely see why there is a debate about ownership, because of the huge returns to shareholders.
“[Renationalisation] may or may not be the right thing to do. There are excessive returns to shareholders at the moment. But it doesn’t make a huge lot of sense to me to take the networks into public ownership and leave the rest of it.
“The other thing is of course that ultimately what we are trying to achieve is a low carbon modernised effective system. You do need to retain the skills and expertise in that reside within those companies and while the returns to shareholders are massive, they are seen again seeing a lot of pressure on costs and delivery. If public ownership would achieve that that would be a positive – but it’s not just about the ownership, it’s about how you manage it.”
Ferns thinks the role of the regulator has to change: “We are looking at workplace workforce resilience and the safety implications of the excessive hours of working that we see and the failure to engage with the workforce in a strategic way.
“If you consider regulation with a net zero world in mind and think about the workforce as one of your key assets there is a lot of improvement that you can make. But Ofgem has tended to take a step back from that and the companies are primarily concerned about returns to shareholders.”
An expensive sideshow?
I ask whether that makes renationalisation an expensive sideshow and Ferns says: “That’s the risk. There are lots of potential benefits but the risk is that an incoming Labour government will get involved in very long – probably legal – proceedings with the companies. But thinking ahead to net zero,the legacy should be a new investment.”
I ask about other types of ownership, for example local authorities, but Ferns thinks they have had a bad experience with the retail market.
“I think that something that government should be looking at because retail markets are not sustainable. It’s not the long-term model that we should be contemplating, when you think that most customers don’t have contact with the network companies or the generators – they only have contact with the retailers and yet we have a retail model that clearly is not operating properly.”
Brexit fears – or not?
When I ask about current uncertainties I expect to hear about Brexit but that has been the last concern on the list in members surveys.
Their concerns include the capacity market suspension, or more immediate workload and stress. Ferns says: “A lot is expected of our members. It’s clear that that has intensified in terms of workload pressure.”
When I ask whether energy is still an attractive industry, she says there is no single answer.
“Members who have been in the industry a long time are now close to retirement and they have certainly had a good career but they be glad to leave when they do because it has got harder.” And she says new people coming into the industry regard it as very uncertain.
She says the industry previously had very fixed roles but with more automation and digitalisation, “people coming in with those skills, who tend to be younger, can use those skills in many other industries… There is a greater sense now that those skill sets are transferable and there are other sectors that offer good employment.”
Looking for new skills
I suggest it is best to be an industry people want to return to. She says: “That’s a key question the industry hasn’t grasped and it requires a modern and positive and flexible approach to the workforce. To be fair some companies have recognised that … we are less certain small companies could do this.
“If you are a young engineer, [good terms] may not be your top priority at the minute but at some time it will be. The danger is that without those relationships with unions you will see lower terms and conditions and once that happens it will go across the industry and the industry as a whole will lose out.”
Ferns is keen to stress that “unions are sometimes portrayed as blockers to change and we are absolutely not that. Our members can see the benefits of making the transition and we do support the path to Net Zero – but what is the journey like for people? That is the key issue.”
When we talk about smaller companies entering the sector she is concerned that they “don’t understand what a union can bring. We are experts at work and at managing that process of change is what we do.”
New Power Report subscription includes:
- Weekly email Update
- Monthly New Power Report – analysis and insight
- Access to our online Database - search and sort data on 2500 UK power assets
For more details and to join our next free trial, send your name, job title, company and email address to Daniel Coyne: [email protected]
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