Welcome to Zero. I am Kshatrati. This week the future of the grid. Today we have part two of the grid series for Zero and if you got last week's episode, you heard from Sunjeet Sanghera, a grid expert who used to work for Bloomberg NEF and recently moved to the National Grid.
When I picture the grids, I picture driving on a long road trip in Canada. On the side of the highway, you'd see these power lines stringing across the countryside, and I remember thinking like, we can't possibly be connecting everything together with these wires. That is exactly what we're doing.
The question of grid readiness is fundamental to the energy transition, Why we need to update it, how we update it, and who is leading the way. This week we talked to Keith Anderson, the CEO of Scottish Power, a utility here in the UK, facing these questions as the UK ushers in a new government, one which is pledged to create a new entity called gb Energy that's supposed to give the state a more hands on approach to the energy transition. Keith has a few ideas about how to
get the UK back on track from meeting its climate goals. Keith, welcome to the show.
Thank you. It's great pleasure to be here now.
As the CEO of Scottish Power, you're responsible for supplying electricity to four point six million households around the UK. And one of the things we are going to get into is what you want to see from the UK government. But before we do that, I wanted to ask some broader questions around the grid, around utilities. If you look at someone in a role like yours, whether it's here in the UK, or in Indonesia, or in Mexico or in Croatia, there is something different about being a CEO
of a utility company in twenty twenty four. This is a very different job from say ten or twenty years ago. How different is it?
Well, A lot has changed over the last five ten years in particular, and I think one of the biggest things that's changed is people have kind of woken up to the importance of the grid, woken up to the importance of how is it we get power to people's homes, how is it we reconfigure, redesign the grid system for modern society, and how is it we reinvest in a grid that was built a long time ago to make it fit for the future. And I think one of the biggest things that has changed that debate is this
march towards electrification. If you think about everything that's going on in modern society, whether it's eves, whether it's the electrication of heat, data centers, AI, digital technology, everything is about electrification. And that's why one of the constant phrases that we use when we're speaking to politicians to governments is now we're saying to everybody, electrification is unstoppable, because
that's the way we're going. And so the more and more you realize that, the more and more you realize how important the grid system is. The other great analogy we use. It's wonderful having an iPhone, and no point in having an iPhone if you don't have a charger. It's the same with an EV it's the same with a wind farm. If you don't have that grid system, and you don't have the grid system ready and capable of dealing with all of that, then none of this works.
But if we look at the grid, electricity has been the biggest form of energy being consumed in developed countries for more than thirty years now, so it's not like electricity or electrification is new. It's the rate of growth of electricity use that is new. So is it just that, you know, developed countries have kind of forgotten how to build a grid, and now that electrification is causing demand to grow much faster than it has over the past few decades, you're facing these new challenges.
Well, I said, it's a good question and a good challenge. I think there's a couple of things going on. I think in a lot of developed countries, whether it was an established grid system built your forty fifty, sixty seventy years ago, there's been a little bit of a maintaining the assets, if you like, sweating the assets, getting the best value for money out of those assets, and continuing
to use the assets. What what's then happened is the generation feeding into them has started to change quite dramatically. We were most of us reliant on systems where we had big centralized power stations, and we're moving to a system now of much more distributed generation. So that starts to create challenges on the grid and the way the grid system works. The other thing that has gone on is switching from carbon fuels fossil fuels to renewable energy.
And again that changes the way the entire system works and the entire system functions because you have to start balancing in a different way. You need more interconnection, so you need to start developing your grid. And then the third bit of it is the electrification. You know, if you take a country like the UK, UK is quite often held out quite rightly as being a leader in decarbonization,
but we are not a leader in electrification. With quite rightly and very importantly focused on decarbonizing the electricity system. But what we now need to focus on is electrifying the economy because all of these new technologies and new industries will look for electricity, data center investors, electrical connection.
And at the same time you've got older industries, more established industries, and you've got things like the transport system moving from carbon to non carbon and electrification as well.
But if we go back to the point you were making, which is that because of the distributed nature of electricity generation today and also the variable nature of electricity generation, the challenges are different. But you know, about a decade ago when renewables became cheap enough to start to replace for sol fuel power, either through subsidies or through natural cost declines. There was this fear that how are we going to handle thirty forty percent renewables on a grid
that is variable? And now there are days when the grid is completely powered by renewables. So was that fear mongering overblown? Was the fear just not rightly placed?
You always have a when you're moving for one system to another, you're about to have a bit of uncertainty and a bit of concern about how do you deal with that? How do you manage that? I mean, I can remember back to when people were getting worried about ten percent renewables in the system or fifteen percent renewables in the system. But grid technology moves on as well.
The technology, the way you build the grid, the way you manage the grid, the way you utilize the grid, the way you design the grid is all changing at the same time. And also what you've seen lots of countries do is more and more interconnection, so making the grid system much much more flexible, allowing you to shift
and move power about. You've also seen the rapid growth in some countries like the UK offshore wind which helps to balance off some of the intermittency of onshore when you've seen the growth of solar, which again helps to balance that off. So all of these technologies are coming through. We're seeing a huge growth and battery technology again helping to balance and manage fluctuations in the system and voltage
control issues in the system. So all those technologies, all the variability of the technology, all of that investment interconnections just making it more and more possible and easier and easier to up the level of renewables in the system and manage a system in that way. So now you rarely hear people talk about the concern of what will happen if the wind doesn't blow one day because the
system is run in such a different way. And that's been part of the big, big investment program that's going on, and part of the big investment program that still needs to come on the grid.
Now let's come to Great British Energy. This is a pledge that the Labor Party has made about what it wants to do in energy. Now, the Labor Party has been quite veig about what exactly GB energy is going to be. But from what you know, is this a welcome development.
The concept of Great British Energy is fine. I have absolutely no issue with it at all. In fact, it's great to have anything being set up or created that brings a bigger focus on the future of energy and what energy can do to drive the future of economic growth in the country. Is a really positive good thing. So that's brilliant.
I'm very much focused on electricity, not all that.
Absolutely, and that's the critical thing. Again, it goes back to the conversation about electrification. Electrification is unstoppable, okay, So that's great and brilliant. It's now just about where does it add greatest value and in which processes, And that's the debate we need to have and get into the detail of okay. And that's where the expression comes about.
And I'm not suggesting this is what it is. But if all it ended up becoming was a bank, then I'm kind of sitting here, Well, you know what, there's a hundred banks out there already. I don't need another bank. If it's involved in looking at policy, if it's involved in looking at how do we set up the mechanisms to deliver the hydrogen economy, How do we set up and encourage the transfer from gas boilers to heat pumps, How do we make sure there's a better effective rollout
of ev charging and changing ev charging. How do we use existing schemes like the energy efficiency scheme to direct the money more to heat pump conversion, etc. Then those things start to add a huge amount of value. They start to unlock a huge amount of investment. Right now, if what the program did was buy shares and offshore wind farms or take stakes and offshore wind farms, fine, that's not going to build them any faster. It's not
going to deliver them any faster. So it's really about where you add best value and the kind of amounts of money that are being talked about being made available to bridge energy. Then it's about how do you focus that And I think innovation and research and development policy creating the correct mechanisms, creating the right incentives right now, I think that is where any government coming into power could add a huge amount of weight and a huge amount of speed to what we want.
Well, that doesn't sound like gb Energy Corporation's job. That just sounds like the government's job. Now, Labor has promised to decarbonize the grid by twenty thirty.
Is that realistic targets get set all the time? Okay, and different governments. Different parties bring along different targets. The government and the run up to the election had targets. It changed targets, It made some targets more ambitious, it chopped others. I generally don't get overly excited about targets
and dates. Having ambitious targets is good. If somebody sets a target of decarbonizing the grid by twenty thirty or somebody says there's a target of having fifty gigawats of offshow win by twenty thirty five, if we end up with forty eight gigawatts, is that a disaster.
No.
If we end up decarbonizing the system by ninety five percent instead of one hundred percent, is that a disaster. It's great to have big ambition. It's great to show the industry, to show the supply chain, to show investors we are absolutely serious about this and we will put in place the policies and the mechanisms to allow you to invest to deliver it. We will focus on speeding up the planning system and the clarity of the planning system to allow your projects to come through, to allow
you to push harder and go faster. That's what we want that's what we like to see. Whether the targets twenty thirty or twenty thirty three doesn't make much difference to me as long as I have that ambition, that clarity, and the policies to back it up.
Now, there are things that are just called natural monopolies because of the way in which a particular asset operates. Typically utilities which are building cables or utilities that are building pipes, so water or electricity tend to be natural monopolies that it is all only worth having one set of pipes and one set of cables to do the job. But natural monopolies should not exist in a proper capitalist market where there is competition and that drives prices down
and helps the consumer as well as helps innovation. So one way around the whole existence of natural monopolies is to regulate them, and regulate them well. In this country, poor regulation of water utilities has meant they're now dumping sewage at scale and have been doing that for years into rivers into sea utility regulation has been running okay so far, But what do you think the governments could do better in regulating your business that would enable the transition to go faster?
I think one of the things when we look at the UK economy and the balance of competition and regulated our sets, you need to think very very carefully about which model works best for what kind of investment. I think the regulated model for grid investment, the way it's working now with the real system, the five year cycle of investment is actually encouraging all of the right level of investment to come through. The system are also built
into that mechanism. There's actually a huge amount of competition, okay, because if you look at the way all of the work is procured and the tendering process, there's a massive amount of competition, and tendering goes on feeding through to make sure the price that's being paid is market driven and incredibly efficient and effective, and that feeds into that system.
If you look at the regulator's job, they're managing that balance between creating the incentive for companies to come forward invest but managing the scale of that investment and the impact and the end customer and the fact that we've got a model that then stretches that out over forty years. So when you hear people talking about the billions of pounds we need to invest in the grid that sounds quite scary to the public about what's that going to
cost me? Well, you start spreading that out over forty years, you minimize that impact on individuals, and again that's a great model. And then what you also need to do with other parts of the market is look at would competition be a better answer or the correct answer? In some cases yes and in other cases no. If I give you a couple of examples, you look at smart metering or meeting and a decision was made several years ago in the UK to do that as a competitive process.
I think most people now would look at that and go, you know what, we made a mistake in the UK. Actually, if ever there was an asset investment program and a rollout program that was suited to regulated market, it was that and would have been far more successful and far faster at doing it. Where we started the build out of offshore wind the regulator looked at creating the off or the offshore transmission market and putting that those assets
out to a competitive process. It's not been bad. It works, but the question is what benefit has it brought. It's a lot more complicated, it's a lot more difficult to do into marriage and I'm not too sure that there's been a massive upside or a massive benefit. So yeah, what I always say in conversations with the regulators, don't
do competition for the sake of competition. There has to be a clear, identifiable benefit in terms right now, when I look at the future of the grid and what we're going through in the grid, and if I look at the future of offshore wind and what we need to do on offshore wind, the other thing you need to take into account is we need such a huge uplift and investment. We're mapping out massive projects both in the grid and an offshore. Is that a good time
to fundamentally change the model you're using. I would suggest no. What you need more than anything else right now for investors and for that kind of pace of growth is stability, transparency and sensible management of the costs and the returns. And that I think is more critical right now than worrying about whether it's regulated or whether it's competitive.
After the break, it's not just about the grid, it's also about the people who work on it. Keith explains why the UK needs more engineers and by the way, if you like this episode, please take a moment to rate and review the show on Apple and Spotify. It will help others find the show. Now. You recently said that when it comes to the UK making strides and clean energy, there are easy answers which don't cost money, and that it frustrates you when those avenues are now
being used. What were you referring to.
That's it in the context of a conversation about how much money does the government need to put into this and into the future? Okay, And you know what I would say is, you know, if you look at the UK specifically, what is quite clear is that fiscally there are constraints in terms of where our economy sits and therefore how much money the government can put forward into the economy. Okay, in terms of what's called Great British Energy. I don't need or want another bank, so I'm not
chasing this government looking for money. Okay. There are good regulatory mechanisms in the UK that encourage and allow investment to flow through the grid. There are some great market mechanisms like the CFD that encourage and allow money to flow through to allow the buildout of onshore wind, offshore wind and solar. So those mechanisms are great. What is it we need now is we need to look at
what other blockages are in the system. If I look at this from the perspective of my company of Scottish Power, we're part of the a Bodrolla Group. Right now I can attract twenty to twenty five percent of the air Bodrolla Group's capital into the UK to invest in the UK system. I should be able to attract even more of that. What's the constraint speed? What the speed come down to? More often than not, it comes down to things like the planning system. So let's invest in modernizing
the planning system. We've talked about modernization of the grid, We've talked about modernization of the generation system. What's not being modernized as the planning system. We're still operating the same system of all was operated. We need to get faster at getting things through that planning system. Now. Part of that is more resource in the planning system. Part of it's the coordination of the planning system with other
bodies and other stakeholders. Part of it's not running it as a serial process, run it as a parallel process. There are a whole load of things like that that can be massively improved. That will allow decisions to be much clearer, decisions to be made much faster, and allow projects to get up and be running much much quicker. So those things you do not need hundreds of millions
of pounds to resolve those kinds of issues. Okay, they're also things like new technologies coming into the market, and that's where governments can really help is how do you create the right policy framework and policy environment. How do you create the right incentives to start allowing things like the rollout of ev charging. How do you do the same thing for the rollout of heat pumps to shift
away from gas boilers to the electrification of heating. How do you look at and encourage the growth and the development of the hydrogen sector. Again, from that perspective, we're not looking for huge amounts of money. A lot of that is about policy frameworks, market incentives, obligations to start invigorating those markets and encouraging investment in those markets.
Another missing piece that you've pointed out is skills. Now, skills can mean lots of different things, and getting those skills can also mean lots of different things. It could be universities, it could be companies taking on reskilling programs, but specifically, what skills are missing from the workforce right now and who are the actors that can help bridge that gap.
Yeah, people, skills, jobs is a massive part of this conundrum and of the challenge and the opportunity. So what do we mean by that? This is about getting people engineers. That covers a multitude of sins or opportunities. But that is from people who will be outfitting smart meters. It will be people jointing cables. It will be people stringing gridlines. It will be people designing and building wind turbines. It will be people designing and building foundations. It will be
people designing and building converter stations. In HVD we see subse cables, Okay. It covers a massive range of skills what we see when we look at the growth even if you just take the grid Okay. National Grid have announced a sixty billion pound investment program. We've announced out to twenty twenty six, a twelve to fifteen billion pound investment program. There are massive programs of investment out there, and one of the main parts we need the physical material.
The other bit is the people to do the work. And there aren't enough of them right now, and there aren't enough of them at the trainee level, and there aren't enough of them at the fully skilled experienced level. Okay, so what do we need to do? We as an individual company, we have a big role to play in that. So we run an apprenticeship scheme, we're on graduate training schemes, we go out and do employment schemes, we do gray training, and every company can look at doing that, but on
its own that's not going to be enough. So we need a coordinated approach with the government. Local colleges. Colleges play a massive part of this. You know, this isn't just about universities, schools and universities, and we need to look at the concept of setting up training academies, shared training academies. Okay, because right now I'm looking to employ another thousand engineers. My counterparts at SSEE are looking to employ on other thousand engineers, and my counterparts on National
Grid are looking to employ another thousand engineers. In fact, I think right now in and around central Scotland we're all looking for about two and a half thousand engineers. There are not two and a half thousand unemployed engineers in Central Scotland. So if we don't do anything differently,
we'll just run around stealing staff from each other. You put on top of that all of the supply chain companies we use, so the cable manufacturers, the civil engineering businesses, the environmental consultancy businesses we use, and all of this subcontractors we use. They're also all out looking for staff
as this workload roads grows. So this concept of creating joint training academies where we put hundreds of people into them, train them up, and then we can deploy them and share the resource through the supply chain, share the resource through the utility companies.
But if it's a shared resource for training, that could just be done between companies, why do you need the government involved.
I just think, you know, it's important to get the government involved, just from the point of view, because you need to then get all of the colleges involved. You need to get the schools involved in feeding people into
that program as well. So that involves making sure that the school program is set up and designed to feed people into it, that the college programs set up and designed to help train and run some of the training, and that you aren't creating another initiative on top of fifteen initiatives that are already be run by other bodies. It needs a huge amount of coordination to deliver it.
I know you're not an education policy expert, but I wonder what kind of specific interventions in schools, colleges, universities you think need to be made to help reduce the struggle that your company has to hire the right people.
A couple of things on that. I think will's talk about stem about the sciences, about maths, about physics, and it's a great thing to focus on. And the more the more we can encourage children to be studying or getting involved in those subjects is hugely beneficial to the future of our economy, not just from the energy sector or the electricity sector, right across the whole of the economy.
Those skills are fundamental in so many areas. What is as important, I think, though, is getting into primary schools, and I think you need to start this at primary schools and also educating the teachers and educating parents about what's happening and what opportunities there are in the future. I think right now, if you wander around primary schools or go and speak to parents and talk about Oh
have you thought about engineering? I think you would end up if you asked ten parents or ten teachers what they thought about the future of engineering, you would get a very wide and weird array of answers from is that something to do with getting your hands dirty fixing the underneath of a car? In this country culturally, I wouldn't fully appreciate and don't hold the engineering profession up to the same level as the accountancy profession, the medical profession,
or the legal profession. It's almost at a level below it, I would argue, and I'm not an engineer, I would argue today that engineering profession should be above all of those other professions because of its criticality to the future of this country. Whether you're looking at it from things, whether you're looking at from infrastructure, whether you're looking at
it from digital technology. We need more people learning those skill sets, understanding those skill sets, and delivering the future of the country.
Thank you, Keithan, thank you, thank you for listening to zero. And next week, on the last installment of our grid series, we'll hear from the founder and CEO of DS Conductor, Jason Holan.
Fundamentally, progress in conductor is dependent on material science programs. But when you have better conductors, you also have to check the box for the utility in terms of their concern on practicality, safety, reliability, longevity, easy to work with. Value is not easy.
He explains why breakthrough technology is just step one when it comes to updating the grid. And now, for those who wait till the end, the sound of the week, that is the sound of a win turbine turning slowly. If you like this episode, please take a moment to rate or review the show on Apple Podcasts and Spotify. Share this episode with a friend or with a primary school teacher. You can get in touch at zero pod
at Bloomberg dot net. Zero's producer is Mighty Lerau. Bloomberg's head of podcast is Sage Bauman and head of Talk is Brendan Nunan. Our theme music is composed by Wonderly Special thanks to Kira bindram Anamazarakis and Matthew Griffith, i am Akshatrati back So