07 Apr To light up the north
Keith Anderson, CEO, ScottishPower, sits astride the significant power supplier to the entire nation, showing us the way forward.
Scottish Power plays a central role in the U.K.’s just transition to a net zero future. With 100 percent of your generation originating from renewables, you are also extending your services to help consumers green their homes and transport needs with EV chargers. Could you walk us through ScottishPower and its medium-term objectives for wind and solar?
ScottishPower is part of the Iberdrola Group, one of the largest energy companies in the world and a leader in wind power. The group has been on a transition journey to drive forward decarbonizing the energy sector and help countries decarbonize. ScottishPower leads that activity for the U.K. In the U.K., ScottishPower started on this journey about 25 years ago with our first investments in renewables. Back then, we were predominantly a coal generating company, but we looked to the future and saw very clearly that this had to change. The whole topic of climate change and the environment was becoming more and more important, and the science behind it was becoming much clearer. That early start led to us becoming a 100 percent renewable generating company. We have shut down all our coal assets and, in December, we blew up the last chimney on the last coal plant in Scotland. In doing all of this, we not only shut down coal for ScottishPower, but we also shut down coal for all of Scotland. Overnight we moved Scotland massively toward being a decarbonized, renewable economy. Scotland now only has one small gas generating plant left in the north, which belongs to another company.
Everything we do as a company is seen through the prism of net zero 2050. That is the key driver for all of our strategic future and decision making. We will never go back from our current 100 percent renewable status. Hence, we have no interest in looking into carbon capture and storage, or gray or blue hydrogen. Everything we do now revolves around how we can help this country move into the decarbonized world and how to help our customers make the shift to being decarbonized. That drives the whole strategy of the organization and delivery. This has driven us to keep investing in wind, solar, green, hydrogen and battery technology. It is a massive driver behind all investment we are putting into both on- and offshore wind, particularly through the ScotWind process and the future of floating offshore wind for Scotland. All the investment we are putting into the grid, transmission, and distribution system is about how that helps decarbonize the country. It is about creating that system and getting it ready for the electrification of transport. The distribution system allows us to decarbonize heating and to move from gas to electric heat pumps and ground source heat pumps. Then we have the retail business, which is where we have the touch points directly with customers, again helping them to decarbonize.
What makes us unique is that we are the only big energy company left in the United Kingdom which is involved in generation, transmission, distribution and retail. Every other company in the sector is either focused on renewables and the assets, or on the transmission system and the assets, or on the retail sector. ScottishPower is the only company that looks right down the entire spectrum. It allows us to link customers, be they individuals or businesses, all the way back to renewables and show them a clear path. For example, we can show them how the wind farm brings power to your business or to your home. We understand every part of that process, how to get it from the wind farm to your house, car and heating system.
What are some of the main challenges you are facing in this rapid transition?
There are challenges as we work our way through the whole economy. To some extent, decarbonizing generation is the easiest part of the process because we can close coal plants and build wind farms. The consumer switching their light on and off will see no difference. It has no real impact on their life. Part of the challenges in decarbonizing generation is about the speed of the planning, regulatory process and environmental processes. We need to keep going faster and faster. While we have been massively successful in building wind farms and shutting down coal plants, we need to grow and accelerate. As we decarbonize transport and heat, we will use more and more electricity. For every gas or coal plant we switch off, we need to build more wind farms. We need to build more wind farms for all the cars, for all the heating, and for all the hydrogen, because everything has to be renewable, otherwise it is all pointless.
Challenge number two is about how we bring customers on this journey with us. Once you start talking about transport and heat, you have a bigger, more direct impact on people’s lives. How do we make this easy for you when you sell your diesel or petrol car to choose to buy the electric car? How do we make it easy when you are looking at changing your boiler in your home to buy an electric heat pump as opposed to another gas boiler? Part of that is through regulation and policy, but for us it is about innovation and investment, creating new products, and making those products the obvious choice. When you look to change your car, let’s make it very simple and obvious to buy the electric car, showing you, for example, the charging network, so you know where you will be able to charge your car. Furthermore, we need to make the cost of all that very attractive because charging your car with green electricity is cheaper than filling up with petrol.
Energy price inflation is a hot button topic at the moment. What is your growth expectation for the energy industry in 2022? How do you see industry players address these challenges?
The important thing is that we do not take our eye off the size of the prize of getting to net zero. Unless we get to net zero, the consequences for this country, for the citizens of this country, for the environment, and for the world are catastrophic. No matter what is happening in the economy from year to year, the importance of that goal is still as important today as it was yesterday. ScottishPower as a company must stay focused on delivering that prize. We need to keep the delivery of all the renewables, the decarbonized transport system, and the decarbonized heat system. We have already reduced our reliance on gas by building and investing in more renewables. The more we reduce our reliance on gas, the less exposed we are to volatility in the gas market. The more we switch gas off and use green electricity, the less exposed we are to price spikes because the UK market is moving to low-cost renewables and a fixed and predictable cost of renewables generation. As we move in that direction and we deliver that outcome, the cost of energy will come down and the predictability of the price will stabilize. Thus, customers not only get all the environmental benefits, but they also get a cheaper, more predictable and less volatile product.
Now, what do we do about these issues today? This is a combination of what we can do as a company as well as what we can do with our government and social policy. There are a lot of tools open to the government around how it can help support people through the pressure of a cost-of-living increases such as taxation, VAT, energy bills and special support schemes like the Warm Home Discount. For us as an industry, we continue putting in the most competitive placing we can and putting through the innovation to drive down the cost of what we do. We continue looking at how we serve and manage customers and help customers. Additionally, we have a whole suite of policies in place to help customers with debt, to help customers who live in fuel poverty, and to help support those people through this crisis.
This is a much wider issue than just being about energy. If inflation rises and the cost-of-living goes up, energy is a part of it, but those government policies need to look at how they tackle the entire issue. The important message to the government is to not change the renewables growth targets or decarbonization policy on transport or heat, because all of those things, in the long term, will help make sure this country does not suffer the same problem again.
You played a leading role at COP26, with Scottish First Minister Nicola Sturgeon praising your bullishness about growth in the renewable sector and your massive recruitment drive. Post COP26, how has this momentum continued, and can you actively see that a lot of the ‘talk’ has turned into action from players in the green economy in the U.K.?
Things have been very positive in the U.K. While political parties argue about almost everything, all the political parties agree that net zero 2050 has to be the target. For Scotland, it is 2045 because of the natural resources we have here. That gives better long-term certainty about policies and direction. We are not having to worry that, if there is a change of government, all policies and targets change. Everybody is focused on delivering the same thing, which is fantastic. The only debate is about how to move and deliver faster. The timing of ScotWind has been brilliant, coming two months after COP, which is the next, massive step forward. Originally, we were talking about 10 gigawatts of projects and now we have moved it to 25. That is a phenomenal step forward for Scotland and for the whole U.K. to meet the targets we need for 2050. Our seven gigawatts across our three projects would power 8.5 million homes, which is way over the number of houses in Scotland. That alone shows you the size and scale of the ambition.
It gives us time for all the research and development, the innovation, to create all the jobs, and it allows us a huge amount of time to invest in supply chain and the basic infrastructure. Economically this will be of huge benefit to the future of Scotland and the U.K.
From a Scottish business perspective—and I speak as chairman of the business organization in Scotland (CBI)—this is also a massive boost and benefit. These 25 gigawatts of future offshore wind projects is colossal. That is bigger than many countries’ entire renewable program. For any company already in Scotland, it is a colossal opportunity. They have the time to look at how to get involved, how to invest, to be ready for this future, and how to help deliver these projects—from a planning point of view, an environmental point of view, through deep water technology, shipping, cabling, manufacturing, or skills training. Thousands of companies can get involved in this.
Overnight, we have created the potential of an industry that is big enough to be attractive to any company anywhere in the world. If you want to be involved in floating wind, in the development of the technology, or exporting it across the world, come and invest in Scotland. From a CBI and a Scottish economic point of view, this is the best sales pitch you could possibly hope for. Scotland, just on its own, is seeing a colossal shift in momentum.
Great Britain has the fastest decarbonizing energy system in the world. How do innovation and R&D drive the industry in the UK, and, specifically with ScottishPower’s range of digital products, how do you drive innovation and digitization in your own company?
The whole renewable sector is just jam-packed with innovation and change, and that has driven the cost of renewables down so quickly. If you go back four or five years in the U.K., an offshore wind farm probably would have cost about £150 per megawatt hour. Today, for an offshore wind farm that cost is down below £40. That comes directly from innovation investment. It is also about creating a huge marketplace that is attractive.
That is why processes like ScotWind are so important. If you create a big enough market and a big enough prize, companies will invest in innovation, research and technology, and they will drive the cost down very quickly. The innovation and change that has gone into wind turbines over the last five to 10 years to deliver the 50-megawatt machines that are used today is colossal. It is not just the physical size of the machine or the blade design: all the materials, the gearboxes, the foundation technology, the cabling technology, and the systems that run the actual carbine, have all changed exponentially over the last five or 10 years. This has happened through innovation, through digitization. Every single wind turbine we operate in the United Kingdom feeds information to our control center based near Glasgow. We can look inside every individual wind turbine, see its speed, look at its temperature, check its oil, check the hydraulic fluid, and the performance of the gearbox. To be able to do all of that from one place took a massive effort in terms of the digitization and automation process. I do not need to send someone out on a boat or Land Rover to go and climb a wind turbine to check it out. I can do it through digital technology. That is a big change.
Digital technology enables us to use the system more effectively and efficiently: shift power from place to place, store the power, balance the demand needs of customers and businesses with the production, shift and change the power output and outages, monitor the performance of every cable and substation, take homes that have solar panels batteries and electric vehicle and use them to feed in and help balance the demand on the distribution system. All of that is through digital innovation. It would be impossible to get to 2050 without a massive wave of technology investment and a huge digital program.
Do you have any final comments for the readers of Newsweek magazine?
Get involved. This comes down to all of us. Companies cannot do it for you. Governments cannot do it for you. It is about everybody coming on the journey. I suppose my request, and my challenge to everybody is to think about how you can help tackle climate change and get involved and join us. What we always say in our company is that we are trying to create a better future quicker for everyone. Come and join us on the journey.