Looking back to look forward - Nick Winser

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Courtesy of Energy Institute (EI)

In 2014 we are celebrating the 100th anniversary of the founding of the the oldest of the Energy Institute’s predecessor organisations.We will be publishing throughout the year interviews with eminent figures from the world of energy, reflecting on how the past can inform the future. This month, NickWinser FEI writes from his unique position at the transmission and distribution centre of the UK energy scene.

From your own perspective, how would you characterise the key challenges facing the energy industry and society today?

The energy industry today is facing an unprecedented challenge, with it rarely spending a day out of the news. The first observation is that this is a global challenge. Liquefied natural gas (LNG) and coal are traded on world markets, meaning events as far away as Japan and America can have an impact on us in the UK. This has been demonstrated following the unfortunate events at Fukushima changing world LNG markets, and the much publicised shale gas revolution in the US affecting industry competitiveness. These events come against a backdrop where energy demand is forecast to increase, world population is on the rise, and there is growing certainty that our carbon emissions are having an impact on climate change.

The specific challenges we face in the UK are that our ability to rely on UK Continental Shelf gas is reducing, our generation fleet is already starting to close in line with environmental legislation, and the energy infrastructure is ageing, so is in need of replacement.

As energy policy develops we seem to keep experiencing external ‘shocks’. The strength of the global economy has affected the appetite for investment risk; the rapid growth of shale gas in the US has affected the economics of gas plants thereby impacting on security of supply. Energy is also becoming increasingly placed at the forefront of political debates.

How can we use the experience of the past to plot the future? (Given hindsight, have mistakes been made in the past, and are we learning from these?) It’s extremely important that we use the lessons of the past to help us in the future. There are arguably very few places in the world in which energy policy and markets function perfectly, so there are definitely opportunities to share good practice and learn from the experiences of others.

I think the most important point to raise here is around the need to ensure policy decisions are taken with full view of the impacts on other aspects of the market. For example, interventions made in one area such as renewables can have a consequential impact on others, such as security of supply and the need for plant availability whilst that generation is not available. The key learning from this would therefore be to consider the full suite of policy issues at hand at the point of making decisions in one area.

Please comment on the energy policy ‘trilemma’ – the need to balance supply security, affordability and sustainability?

Balancing all sides of the energy trilemma is a major challenge for policy makers across the world. Each element of the trilemma in its own right is as important as the next, with each one being heavily influenced by the operating environment at the time.

At present there is a huge focus on affordability. Affordability affects consumers and industry alike. We know that many people are struggling with their energy bills and we have a responsibility in the industry to ensure the service we provide to consumers delivers value for money. The effect of energy prices on energy intensive industrial users is also significant. The global nature of the manufacturing industry means that increasing energy costs impact competitiveness. Low energy costs in the US, driven by the expansion of shale gas production, mean their attractiveness for industrial development has increased.

In focusing on this area we must ensure we don’t underestimate the significance of sustainability and security of supply.We are now seeing scientific consensus that our emissions are having an impact on climate change.We are also becomingmore aware of tightening in our supply margins as we become more reliant on interconnection and new capacity build as ageing plant closes. Without appropriately considering sustainability we put at risk the future of our climate, and without ensuring secure energy provision we could damage the nation’s economy in years to come.

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