SSE head Ian Marchant on renewables, nuclear and Donald Rumsfeld
The prospect of being in power when the lights go out is a politician’s worst nightmare – and one that outgoing chief of energy company SSE, Ian Marchant, recently argued could come true in the next few years. In a BBC interview Marchant explains his comments – and perspective on UK energy policy – in a bit more detail.
Last month, Marchant said that the government has underestimated the risks of a crunch in power supply over the next few years – and there is a ” very real risk” of the lights going out as a result.
It’s not the only controversy the company is involved in. SSE was recently fined £10.5 million by energy regulator Ofgem for misselling its deals to consumers. Despite a grovelling apology on the SSE homepage, Marchant argues in the interview that ” misunderstanding” is behind most of the misselling, according to media reports. But what about the rest of Marchant’s views?
A crunch in UK power supply
Both Marchant and the head of energy regulator Ofgem, Alistair Buchanan, recently warned that the country could face a squeeze in its reserve power supply as the older power stations close down.
At the moment the country had more power stations than it needs to supply its demand for electricity, but that may change soon. In fact, according to Marchant, the oversupply means some plants are shutting down because “the generation that we’ve got isn’t making any money”. In addition, old coal power stations are now being closed as a result of EU regulations aimed at reducing pollution.
As a result, for the first time ever the country’s ability to generate power is declining. New gas power stations may be needed to fill the gap while the country expands the amount of power is gets from renewables and nuclear. But Marchant says wobbling government energy policy is making this less likely:
“Building new isn’t easy because financial markets are tight…government have said they will introduce new policy but they haven’t actually introduced new policy…to quote Donald Rumsfeld they have created a known unknown. They have said we will intervene but you have to wait. So what do you do? You wait.”
The government doesn’t agree – arguing that the country won’t need to build any new gas plant until 2018. Marchant is sceptical, however – his response to that is, “I hope you’re right”.
Bearing the costs
Consumer energy bills have been rising for more than a decade. While energy regulator Ofgem has largely laid the blame at the feet of rising gas prices, power companies have blamed recent increases on the cost of decarbonisation.
Marchant agrees with the need to reduce UK greenhouse gas emissions. He also says it’s right that the power sector should bear the brunt of the change over the next couple of decades:
“…in the first fifteen years or so of that path is the electricity bill bears the disproportionate cost because that’s the cheapest place for society to pay it…you’re happier that I green up electricity than you drive your car less.”
But he argues the government hasn’t been honest about how much of the initial cost will go on electricity bills. Unlike Ofgem, he says that rising ‘non-energy costs’ like the costs of reinforcing the network grid and supporting renewables and energy efficiency are the “principle” reason energy bills have gone up over the last few years.
Is it right that the energy industry bears the cost of shifting to a greener power system? At the moment, support for renewables and energy efficiency are lumped together in energy bills. Marchant agrees that the industry should pay for the expansion of renewables. But he is less convinced that the industry should pay for more efficient use of energy:
“The electricity industry should bear the cost of renewable energy – it’s an energy cost. It should bear some of the costs of energy efficiency. There are some which I think are more social issues where actually the tax and benefits system should [bear the cost].”
Not yet for nuclear
SSE is widely seen as a leader amongst energy companies on renewable power. Under Marchant’s leadership, it has become the biggest generator of electricity from renewables in Great Britain and Ireland.
Unsurprisingly, Marchant says the country needs other technologies like carbon capture and storage and demand side management if it is to decarbonise the electricity supply.
But he’s less supportive of the government’s plans to expand nuclear power – at least in the short term. About eighteen months ago SSE rowed back from an investment in nuclear. Marchant argues the government shouldn’t be pressing ahead with immediate plans to expand nuclear. Instead, he says it needs to take a step back and learn from what is happening elsewhere in the world:
“We can afford as a country to wait. There is a lot of interesting technology development in nuclear going on – both in Asia, where they are building to time and budget…and in the US where they are looking at…smaller reactors, easier and quicker to build, and I think the UK should say, we’ll wait, we should invest in gas, renewables, gas and demand side management – and that buys us to 2025.”
The Committee on Climate Change, which advises the government on how to reduce UK carbon emissions, would be unlikely to agree that the country can sit on its plans to develop nuclear power and still achieve its emissions targets, however. It sees nuclear power as “potentially the most cost effective form of low-carbon generation in the 2020s” and has projected that the country could be getting 40 per cent of its power from nuclear by 2030.
Marchant is due to retire as head of SSE in the summer. As he steps away, government and industry look set to continue pointing the finger at each other for the forseeable future.