Wolfe Power Club
The Wolfe Power Club Podcast is an exciting platform for exploring crucial topics in the energy sector! With a focus on investment trends, governmental policies, and the evolving landscape of energy consumption, it promises to provide valuable insights for both industry professionals and the general public.
Host Alex Wolfe's background as an Energy director and experience in opening the first HVO Truck Bunker in Britain undoubtedly brings a wealth of expertise to the discussions. By engaging with guests who possess diverse perspectives and opinions on energy-related issues, the podcast is likely to offer a well-rounded exploration of the sector's challenges and opportunities.
Every guest will answer the big 3 questions:
- Where are you investing in Energy Industry?
- What do you want from the Government?
- What do you want Energy Customers to do?
Wolfe Power Club
Electricity Bills: Watt a Rip-Off! In conversation with energy expert Kathryn Porter | S1EP53
In this episode, it’ll blow your mind that the UK pays over £1bn per year to not use wind energy, the great curtailing process exposed.
Kathryn Porter, Energy Consultant of Watt-Logic, chats with host Alex on why and how the UK pays over 27p per kilowatt hour for electricity in comparison to Europe paying under 11p per kilowatt hour. Kathryn also goes into in-depth detail about the UK’s journey from parity in 2011 to today’s price gap.
Watt-Logic's report: The true affordability of net zero: https://watt-logic.com/2025/05/19/new-report-the-true-affordability-of-net-zero/
Kathryn Porter is an independent energy consultant with broad experience of the energy and finance sectors in both leadership and technical roles. She works with companies across the energy value chain, from producers and generators to large energy consumers, advising on new projects, procurement and risk management, and the impact of regulatory and market change. She has specific expertise in the utilities, oil and gas sectors, with finance experience spanning equities and equity derivatives, debt capital markets, M&A, loans, and commodity derivatives.
Kathryn holds a Master’s Degree in Physics from the University of Exeter and an MBA from London Business School. She is a Chartered Fellow of the Chartered Institute for Securities and Investments and is a member of the Institute of Directors. She is also an associate member of the Executive Council of the All-Party Parliamentary Group for Energy Studies and recently became a Liveryman of the Worshipful Company of Fan Makers.
Follow Kathryn on socials:
LinkedIn: https://uk.linkedin.com/in/kathrynporter26
X: https://x.com/kathrynporter26?lang=en
Watt-Logic website: https://watt-logic.com/
Watt-Logic blog: https://watt-logic.com/blog/
Wolfe Power Club is proud to be partnering with the Spectator Magazine to co-host their Energy Summit 2025 on November 24th. If you want to become a potential partner and have the last word on energy debates in 2025, please contact us.
Call to Action:
- A focus on investment trends, governmental policies, and the evolving landscape of energy consumption, it promises to provide valuable insights for both industry professionals and the general public.
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Credits:
- Funk You, Abbynoise, Music from #Uppbeat (free for Creators!): https://uppbeat.io/t/abbynoise/funk-you - License code: 5CEYMJHNJPK0L1G5
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Sponsorship:
Season One is sponsored by Aim Recruit – https://aimrecruit.com/
Aim Recruit is an expert recruiter for transport, logistics and energy positions.
I've come to believe that wind is actually immoral, because if you look at the supply chain, if you look at the environmental harms being perpetuated in countries across South America, for example, from the mining and processing of all the minerals that you need, I think even people who are in favour of wind should find this obnoxious, really, that consumers are being forced to pay and that we're building stuff we know we can't use. Why not just delay building them until we know we can use them? We're chasing down this installed capacity just for the sake of it, and it's costing consumers billions of pounds. I'm literally costing consumers billions of pounds.
Speaker 2:What would you have done differently if Catherine Porter, Cabinet Secretary, had been given a decade to sort out where we spent our money and how to stay competitive on pricing?
Speaker 1:it has to be nuclear. I mean, it's really the only sensible low carbon technology. We need to do what the french did basically in the mid 20th century.
Speaker 2:Ladies and gentlemen, today on the Wolf Power Club, we're trying to answer a question that I get more emails and more messages from all around the United Kingdom, and that's the question of why is our electricity so much more expensive than the rest of Europe?
Speaker 2:This conversation got even more further developed when I was at the CIMO relationship at the start of the summer at the partnership meeting. Lord Debton was there we're going through the actions as in one of the podcasts back and one of the most learned people and engines in the country, neville the chair of the roc foundation, whose concentration normally is on the cost of roads, how we deliver the road network, and even he was like alex. I really want to hear a podcast from you guys about why the cost of electric is so much more in the united kingdom. So, though, normally on the podcast we cover what industry spending money on, what the national grid is spending your money on today. Today we've got an expert in Catherine Porter who's gone back to the 90s and looked at all of the trends that mean we went from a position of virtual parity in around 2011 to an unbelievable gap in our prices versus the rest of the EU. Catherine, can I welcome you to the Wolf Power Club podcast.
Speaker 1:Thank you for having me.
Speaker 2:The message you've got is so important our listeners hear it that I'm very excited. So I'm correct in saying that this May, you produced a report that, is fair to say, has opened up the debate, and it's about the cost of net zero. What inspired the report and what was your background before doing the report, catherine?
Speaker 1:Okay. So the report was commissioned by one of my clients who was concerned that there were a lot of different narratives out there around the cost of net zero, people saying that renewables were nine times cheaper than gas, that gas was the reason that our bills are so expensive and similar claims. And you know they had a feeling that these narratives weren't supported by the data. So they basically asked me to do that work, to dig into the data and find out what the data actually say rather than what the propaganda say. And you know I think I said those findings out pretty clearly in my report.
Speaker 1:And I feel somewhat vindicated because last week the government published the administrative strike prices for the next auction round and they are materially higher than the previous rounds. But also there's every indication that this next auction round will price higher than the gas price. Now. Actually it already did last year. It priced for offshore wind 13% higher than the gas-based wholesale price of electricity for 2024 as a whole. So already that narrative, just on the first order subsidy effect, is breaking down. But of course you really have to take account of the full system cost of renewables, not just the cost of subsidising them. And when you add all of that together, you both come to explain the very high bills that we have. But also, you know you really undermine this argument of renewables being cheap.
Speaker 2:And what I like about your approach is something I've always enjoyed in business. When someone has a great idea or great reasoning, I'm always like take me back to when you spend the first pound and at the end of it, how much have you spent? And and actually, although it's a bit more complex of that when I was on the board of one of the major energy companies, ultimately, when we're looking on capital returns, that's what we did in terms of you know where does our return come from? And it was back to that pound example, and when anyone started talking about opportunities and kick-starting, we'd always come back to well, where does our pound end up and where's the pound start?
Speaker 1:now, taking one of the headlines, we just jump in there. Um, you'd expect the same thing to happen with, uh, with energy costs. But because a lot of these subsidies and the other levies are being recovered through bills and not taxation, they're just not being subject to that same type of scrutiny. If, if the Treasury was paying these subsidy costs, I'm sure we'd have an awful lot more analysis of those costs and the direction of travel. But because they're just being slapped straight onto our bills, there's really very minimal scrutiny. And the Energy Secretary, ed Miliband, has these stealth tax-raising powers, but because the money doesn't flow into the Treasury, he just doesn't face anything like the same rigour around that that the Treasury faces when raising taxes.
Speaker 2:And as a podcast. We are technology agnostic, but we've always raised this concern that where's Ed Miliband or other politicians? In this past they seem to do the double sell on the energy trilemma that I'll give you transition and it will be cheaper. And I think by the end of today's episode people will seriously challenge the concept of it being cheaper, because what I find politicians do try to do is tell you you're going to save this many pounds by going green. But I think today we're going to go into actually the real costs and one of the headlines I'd like to first start and explore with our listeners, since we have here from your reports, is that you felt there was an estimation of somewhere between 218 and 220 billion more since 2006 due to net zero policies. Can you walk through us how that was calculated and in total transparency? There'll be all of our energy transition listeners and we've got a broad audience on this podcast. Who'll be shouting at me yeah, but alex, how's that compared to the 75 billion that's spent on get on the gas in situation?
Speaker 1:Well, that's actually after that cost of gas. So what I took were the wholesale prices of gas and electricity going back to the 1990s, and then I took the household spend on electricity and what you notice and I put them all in a chart. So what you notice from this chart is that up until 2006, you had a fairly stable margin between the wholesale electricity price and the retail electricity price, so the price that households will pay, and then it was the same for businesses. But I didn't analyse the business spend, I just specified the household spend in this work. So we had really from the late 1990s up until late 2021, really low and stable wholesale gas prices and the wholesale electricity price pretty much tracked that. So there was low volatility and they just sort of wibbled along sideways. They went up a little bit, sometimes they went down a little bit, but essentially they were flat and stable for those two decades. Essentially they were flat and stable for those two decades.
Speaker 1:But what we see quite clearly from the data are that from 2006 onwards you started to get a big divergence between the household spend on electricity and the wholesale electricity price.
Speaker 1:So no longer did you have this fairly stable margin.
Speaker 1:You know the price that households will pay will be the wholesale price of electricity plus some network charge to represent the cost of moving that electricity from where it's generated to where it's needed, and then you'd have some overhead for the suppliers because they have to do all the administration around this, and then a little bit of profit for the suppliers and a little bit of VAT.
Speaker 1:From 2006, we noticed that household spend starts to accelerate quite significantly, and so I calculated that if we'd maintained that stable margin that we'd had in the sort of previous decade and that had carried straight through until today, what would we have spent as households on electricity? And then I compared that with what we actually did spend, and of course, what we did spend included the gas crisis, included the amount that we spent on the gas crisis, and so we see this difference of £220 billion in today's money. That simplyiband has been saying that we'll see £300 off our electricity bills by 2030. But the Climate Change Committee says that we likely won't see any savings from net zero until the seventh budget period, which begins in 2038. So people haven't really picked up on that, but the climate change committee just basically doesn't agree with milliband.
Speaker 2:300 pounds in in 2030 and there's something I've seen you do in previous interviews as well as your report that, uh, I think outlines that report is that the normal argument for any transition is it will kick start a market and then we'll end up at lower costs. And we see it in other industries where you know it's the cost of phone manufacturing or the cost of internet in terms of the gigabyte price. But I think I've seen you say previously that some of the areas that we're talking about, these subsidies, have had subsidies since the early 90s. So we're coming up to the 35 year mark or third of the century and it still hasn't kickstarted a market. And is that why you get frustrated? Because almost the people change, but the argumentation stays the same about why a levy or subsidies used in the first place.
Speaker 1:Well, I'd say the market has been created. The market for wind turbines now is a multi-billion dollar industry. My view is that the subsidies began in 1990 here in the UK and they were always sold on the basis that they were priming the pump for an immature technology. But after 35 years your technology is mature, and if it isn't, then there's something pretty wrong with it, and and all the evidence is that it is mature. But the problem is it's not economic and so the subsidies are required, because you could not possibly sell the electricity produced by wind turbine at a high enough price to offset your capital cost if you just relied on the market and you wouldn't get financing. So in order order to finance your project, you require the subsidy. And now we see that the subsidies are going up.
Speaker 1:Al4, so the fourth auction round was the lowest, but everybody, so one of the big projects was cancelled. All of the other projects rebid the maximum 25% of their volumes into AL6. Al5 had zero bids for offshore wind. Al6 was much higher than AL4. And, as I said, we saw the offshore wind price there 13% higher than the gas-based wholesale electricity price. And now we've seen the administrative strike prices for AL7 a big step up. But also they're increasing the contract term from 15 to 20 years and that's worth probably about 12% on the value. So if you were going to do a like-for-like comparison between AR6, which cleared at 83 pounds in today's money, to where we think that AR7 might clear, well you know, 100 pounds is not beyond the realms of possibility and that that leads nicely to another big headline from your report and you talked about in 23 to 24 probably the environmental levies cost in the region of 17 billion.
Speaker 2:To put that in some sort of measure. That's for departments like education or so on. It's a big double digit percentage of a department that essentially the bill payer is expected to pay. You said that that will even rise further in the next five years to closer to 20 billion. So what are the key drivers behind that number? Because that is significant money and people might debate with you about whether it's 17 or 18 billion, but ultimately that's real money, whether it's 17, whether it's 18 or 16, you're starting to look at a substantial cost to every single person that has to be a bill payer in the UK.
Speaker 1:Yes, I mean a big chunk of that is coming from all the different subsidies and the legacy subsidies as well, because the money that you get under things like the renewables obligation and the feed-in tariff although there's not an explicit link with the wholesale electricity price the developers there would receive the wholesale price plus they would receive their ROCs or their feed-in tariffs, and then the value of those is set each year, and if the wholesale price falls, then obviously they want more money through those subsidy mechanisms because they need to get the returns that are expecting.
Speaker 1:And you know I do mean returns here, because consumers are paying the profits of all these developers. It's not just covering the capital costs, they're delivering their return on capital as well, and so as the wholesale price is falling, we're seeing all of these costs becoming more expensive. And also, in order to deliver the Clean Power 2030 plan, miliband is saying that he wants to install huge amounts more wind and solar and, in fact, so much more. That is more or less removed competitive price tension from the new auction. So I actually think that the and the numbers you were quoting they were just from the new auction. So I actually think that the and the numbers you were quoting. They were just from the OBR and I think those numbers will turn out to be conservative, because I suspect that if AR7 clears and I think there's a risk it'll fail then we'll be looking at materially higher prices.
Speaker 2:And that then goes on to another cost that I really want you to go into detail for our listeners because they might not even know. This is a cost in the system and you talk about the UK spending over a billion annually on curtailing renewable energy. Can you explain what curtailing means in this instance and what does it say about our grid readiness? Now, to be fair, in previous uh editions of the podcast we have had abby on from the national grid. Abby went into some detail about the 30 billion they're about to invest in the uk and the other 30.5 billion they're investing uh in the us. So 60 billion pounds of investment. But what you're saying here is actually a billion pounds of costs due to areas of not getting it back into the grid. Could you explain that to our listeners?
Speaker 1:Yeah, so the way the subsidies work is that the generators will be paid to the extent that it's windy. So if you tell them they can't generate when it's windy because you can't deliver the electricity they generate to consumers, then they expect to be compensated for that, and that is what the curtailment payment is. Now we have the single connect and manage, where Ofgem and Desnes essentially decided that the priority would be to connect renewables to the grid and worry about whether you can use that electricity afterwards. There's actually no limit around that policy and the result of that is that we've had wind farms like Sea Green. Sea Green opened in October 2023. And in 2024, two thirds of its output was curtailed, which is insane, because when you have curtailment, consumers pay twice. They pay a gas power station downstream of the constraint to generate the electricity they actually use.
Speaker 1:And then they have to pay the wind farm to not generate electricity that can't be delivered to them, and so, literally, you're paying twice, and this is only getting worse. You've got Viking on Shetland that's a similar story. You've got other new wind farms in the pipeline that will be the same story, and the north to south transmission expansion is delayed. So each year we're adding more and more wind capacity to the grid in full knowledge that we can't actually use it. And you know I've said to Ofgem that I think that their net zero duty and their consumer protection duties are in conflict with each should find this obnoxious, really, that consumers are being forced to pay and that we're building stuff we know we can't use. Why not just delay building them until we know we can use them? We're chasing down this installed capacity just for the sake of it, and it's costing consumers billions of pounds. I literally costing consumers billions of pounds.
Speaker 2:And just on this sea griefing, is it something that's like a lapse of one or two years, and I could understand? Therefore, the argument might be Catherine, you're never going to perfect when the grid comes up to spec, or do you think, actually, these curtailing costs you can pay for half a decade, a decade? It's not something that's just a timing issue of just one or two years.
Speaker 1:No, it could easily be five to 10 years. I mean, it's already nearly two years two years.
Speaker 2:no, it could easily be five to ten years. I mean, it's already nearly two years, wow, wow, that's that. That is that something, I guess.
Speaker 2:Why I also that that puts myself into a bit of frustration is I obviously for years was a commercial director in off-grid ie delivering diesel or gas oil, and you only get paid on the liters you delivered, even on government contracts when you're giving up backup supply to hospitals or to off-grid centers, and quite often then we'd foot the cost of when they didn't take their full delivery and we'd have to find a home for it and the driver's time, but certainly we didn't get paid just whatever. We only get paid for what was news, and I think a lot of the sector that's in more traditional parts of the energy industry only gets paid for what's news, and I can imagine that's a real unfair competitiveness that it's just paid whatever, even if you can't put it into the grid. I mean, have you had sort of clients and industry feedback, that total disparity between sources where some people only get paid on delivery but others get paid guarantee of what they produce, even if not required?
Speaker 1:I mean, it is a massively distorted market because the other big issue is that wind is not run solar and not required to deliver firm power. Um, so if you were to say to your customers, well, we'll give you your product, but only if it's windy or sunny or depending on the weather, we'll give you your product that you're paying for and it's a product they need 24, 7, 52 how many of your customers will be like yeah, that's fine, don't worry about it.
Speaker 2:Yeah, we're good with that and I think a good example of that backup or, as you say, sort of power that's there ready, is sunday night was a great example. Uh, for those who are listening in other nations, unlucky once again. Eng England has the best football team in the world. The lionesses have won euros. But it's a classic sort of electricity demand cycle, isn't it? It's Sunday night, there's millions of people watching the same tv show, there's millions of people cooking and using the same demands, but obviously, like like anything with power, that's not an average or consistent. You get peaks and troughs, and I think what you're also saying is that with renewables, there's huge strain on costs in terms of then backup systems for when they're not producing but actually when society needs their power, such as for lioness victory exactly.
Speaker 1:I mean it's. It's crazy really that renewables impose all of these additional costs, and backup is a significant cost. Also, managing that real time intermittency each gust of wind, each cloud has a measurable impact on output, and electricity grids need to have supply and demand balance pretty finely in real time. It's a nature of electrical equipment that if you don't do that, things will start to break, and so maintaining that balance when you have so much variability becomes quite expensive, and so that's also adding billions of pounds a year. You've got the cost of the backup for when you can have days and days on end I mean this week, for example we're going to have really low wind output Again.
Speaker 1:The last few weeks have been very low. We had a point, I think about a week ago, where we have 32 gigawatts of installed capacity of wind and the actual output measured on the grid was just over 200 megawatts. Now I actually asked Grok. I said if every person in the UK went and blew into a wind turbine, how much would we be able to generate? And Grok came back and went yeah, probably about 200 megawatts person in the uk went and blew into a wind turbine. How much would we be able to generate and grok came back and went yeah, probably about 200 megawatts and this leads nicely, this costing, because I think the reality is.
Speaker 2:There's one thing I'm saying about costs and people go oh, it's expensive too. Oh, it's just the energy sector. Moaning about costs again. But this is some realities of where people have lost jobs in the last couple of years. You've had inios closing down chemical plants and refining plants up in scotland because they've basically said the uk is not competitive for the price of electricity. We had a steel emergency this year where essentially the government was recalled over the weekend and again one of the major things was that producing steel because of the cost of power is so high in Britain has meant that foreign investors are looking to pull out and it almost comes a nationalised industry by default because no one wants to pick up the bill.
Speaker 2:And although it might be down to other things, you have Lindsay Refinery which again people are saying the reason they could not find a buyer when you know Prax went into receivership in the last month and they couldn't find foreign investment. They couldn't find a major is again that the cost of power in the UK is so high and you've put some numbers on this. It's saying that today or it's up to the last year when there's publicly registered information is that the UK's pence per kilowatt hour is almost at the 28p rate. I think it's at 27.9. But you're saying in the EU averages are 10.8 pence per kilowatt hour and yet we had parity in 2011. Do you think this is why heavy industry has actually got a point when they're moaning about the power costs? Because in very simple maths it looks like they're paying two and a half times for their power compared to having the same infrastructure in the EU.
Speaker 1:Well, the shocking thing is it's even lower in the US and in parts of Asia. And so what we find is that, although we are paying significantly more than competitors in the EU, those competitors themselves are not competitive on a global basis, so German steelmakers are not profitable. Basf closed up all its German factories and moved them to China, and actually the Schultz government was essentially collapsed when VW announced it was going to do the same thing. And actually the Scholz government was essentially collapsed when VW announced it was going to do the same thing. It was basically the first time that the German public really cottoned on to what their energy policy meant in practice, and they quickly said they didn't like it. Now I think that what happened since in Germany is actually quite foolish that anyone except the AFD coalition is determinately following the exact same policies of the Scholz government, which the voters rejected so comprehensively, but nevertheless, that's what they've chosen to do.
Speaker 1:And so you're seeing this issue of deindustrialisation and what's very irritating about this? Not only does it harm jobs, harm the UK economy, it actually makes global emissions higher because these manufacturing industries are moving to countries with cheaper energy but typically dirtier energy than we have here in the UK. And then you have to ship the goods that are being produced back here for use, and if we lose our steelmaking capability, that means shipping you know huge bulk steel items halfway around the world, which is a monumentally stupid thing to do because they're big and heavy and that obviously involves a lot of transportation emissions. So I find it greatly irritating when Ed Miliband justifies his policies on the basis that there's a climate emergency, and yet his policies are the the climate emergency that he's perceiving to be worse because global emissions go up as a direct result of these policies, and and. So there's a real lack of internal coherence with this and and and. That just adds insult to injury when so many people are losing their jobs and I think that they are really losing their jobs.
Speaker 2:Like you know, the instance I talked about, depending on locations is suddenly an impact. That's hundreds or thousands of jobs in one postal area. So it's you know, and your kids are in school, you're in the same house that there's not suddenly another job to go to. You know, I went to university in the northeast and I saw that, that that decline in areas, in that you suddenly have big patches together. I think one of the things I'm interested in because, looking at your report, the gaps really started to grow since 2011.
Speaker 2:Um, and although miller band has been in a couple of times since, since 2011, obviously the bulk of it he, he wasn't there, so I'm just interested. Um, and it was one of these roles that it does seems like energy sector and we covered this last week. That Energy Secretary before Miliband did seem to be a role you either got up on the way up or the way down, but certainly never did more than for about a year, or whatever the title changed to. That seems to really hurt the pricing. Seems to really hurt the pricing Since 2011,. What would you have done differently if Catherine Porter, cabinet Secretary, had been given a decade to sort out you know where we spent our money and how to stay competitive on pricing.
Speaker 1:It has to be nuclear. I mean, it's really the only sensible low carbon technology. We need to do what the French did, basically in the mid 20th century. The French looked at their natural resource position and realised they didn't really have any and that if they were going to be competitive against countries like the UK that had its own gas reserves, against Germany with its huge coal reserves, then they were going to need to do something different, and that's why they built out their nuclear fleet. And so, really, if you want a low carbon electricity grid that's reliable and economic, then you have to go with nuclear.
Speaker 1:And it doesn't just give you benefits of obviously being firm power, it has huge energy density. You use something like 3,000 times less land for the same amount of energy with nuclear than you would with wind and solar. And that matters from a cost perspective, because it's not just the land that you need to use. You need a lot more grid to connect it all up. You need a lot more wires. If I wanted to build an 800 megawatt gas plant, then that's one grid connection. 800 megawatt wind farm is 60 turbines, but obviously they only work a third of the time. So on an annual energy basis you'd need something like two and a half times that number of turbines, because gas isn't 100% available to provide the same amount of electricity or connect the same amount of capacity. So that you know, obviously is a material amount more wires, more copper and all the rest of it that you need to install to do that. So this is it's just really really inefficient. Nuclear is far more efficient. It's actually would be much cheaper if we didn't have the self-harm that is represented by our regulatory system. So were I in the sort of ruling, the world role, I would be, you know, taking a huge axe to most of the regulation.
Speaker 1:Now people sort of go a bit pale when I say that and think that implies we'll be lowering safety standards. But you know it's really not the case. Our nuclear safety standards at the moment are the equivalent of making motorists wear 57 seatbelts in their car or telling house builders they need to make walls three metres thick to withstand an earthquake Clearly over the top overly conservative. And if the government did say those things were necessary, everyone would think they'd lost their minds. But because there's been so little focus on nuclear and so many people have a disproportionate sense of the risk, you know more people have died in dam related accidents than have a nuclear accidents. And nobody is worried about hydroelectric power. And far, far more people have died in chemical incidents. I mean, the most dangerous industrial accident in history wasn't Chernobyl, it was Bhopal, by several orders of magnitude. And yet nobody is worrying about pesticides and most people have never even heard of the Bhopal disaster. So we have this disproportionate fear of nuclear that we sort of need to get over.
Speaker 1:And the nuclear regulators require each new reactor to have to reduce the worker exposure, worker radiation exposure levels versus historic reactors. And that sounds fantastic in theory. You think, yeah, great, each new reactor should be better. But then if I tell you that the workers are exposed to more radiation walking to the plant from cosmic rays as they walk along the street, as we all are, then they are inside the plant. Then why on earth should those developers spend large amounts of money trying to make the radiation exposure inside the plant lower if the workers are exposed to more radiation on the street outside? Surely that should be the limit that you work to and not constantly saying, oh no, it's got to be lower, it's going to be lower. Why? What benefit does that provide? Nothing, it's just the corruption of the al-arp or al-ara process and we need to move away from that. We need better accountability for our regulators.
Speaker 2:And I would say to all our listeners now that if you go to a back episode, we had the Atlantic Council on, who are very pro-nuclear. We actually heard how Fukushima have got a great nuclear power growing again. They learned a lot from their lessons from 10 years ago and also how essentially many benefits across the world and it's been a boom year for the rest of the global world with with nuclear. It's been the highest ever trading year with nuclear power, also for our new wave of katherine porter supporters that are listening to the wolf power club for the first time.
Speaker 2:Full disclosure my father was a nuclear engineer for 40 odd years and he always banged on to me on the way back into school about the unfairness that people were very pro-wind but the amount of wind you needed, as you say, because it's not constant, was multiples. And he was funny enough. In 2011, he moved with EDF to integrate British Energy to Paris and was there till 2015. So my dad, I think, will find a smirk on his face the correlation, but sadly us Brits are paying the price.
Speaker 1:I mean, I've come to believe that wind is actually immoral. Because if you look at the supply chain, if you look at the environmental harms being perpetuated in countries across South America, for example, from the mining and processing of all the minerals that you need South America, for example, from the mining and processing of all the minerals that you need you know in the way this indigenous lands are being unfairly expropriated from those communities, the way that water is being polluted, the way that you know. So a lot of the copper that we use originates in Chile and the soil in Chile is very rich in arsenic. So if you want to open a new copper mine, you blast all that stuff into the air and of course then people breathe it. It falls down on the crops, falls into the water, poisons the fish, pollutes the water that they drink, that they use for irrigation and that they use for watering their livestock, and so they have higher instances of cancer and other diseases in the regions around these mines.
Speaker 1:And you see similar abuses in Africa as well. You've got literally tens of thousands of literal children, you know 11-year-olds working in cobalt mines. You look at the manganese mines in South Africa, where the miners artificially lower the water table to reduce the risk of flooding, and that impacts the boreholes used for human consumption and agriculture for hundreds of kilometres around. And you know, it's thought that those water table levels could take decades or longer to recover, and so there are huge social and environmental impacts from all this activity. And for what? For something that only works a third of the time. I think we really need to do better.
Speaker 2:I think it's a fascinating case on wind. I think it's a fascinating case on wind. One thing I would say, even though I'm an oil and gas fanboy and I don't mind taking criticism for that, it is difficult producing energy wherever you produce it. I think you just showed there that measuring something on the tailpipe or the final part of the journey in the Western world isn't taking into account all these unbelievable challenges in that, and it's one of the things I've always had actually concern about electric cars isn't so much what powers them, but it's. The weight of the average car has doubled and you don't have to be the world's best physicist to realize that to get that energy at some point in the supply chain there is almost a mass of material that needs to be used and, as you've just escalated there, such countries chile could well be affected by the things. But I want to keep to uk politics, because it's fair to say that, um, over this year, um, you know, uh, we've got a great opportunity, especially, uh this winter.
Speaker 2:Um, I'll be chairing the Spectators Energy Summit and we can really talk to cross-party politicians over the next few weeks and months as we go into this debate, in that the government has put energy right in its top priorities. But I was interested when you launched the report. The shadow government gave support to it and I also understand understand, you know, and where I first came across your work, katherine was uh, like all great energy people late at night were commenting on things on linkedin and so on, and obviously, uh, claire catino, the shadow energy secretary, was really depressed about where the pricing level had ended up on AR7. And therefore I was just interested in terms of where you're seeing these recent comments from the shadow government, what you think the opposition government parties, whether it's Conservatives or other parties, what should they be saying about AR7 and what needs to change?
Speaker 1:Well, I think that reform have come out and said the right things around repudiating the contracts potentially and I would encourage the Conservatives to align with that and they're just not in the public interest. It's not in the interest of consumers to sign 20 year contracts at prices that are materially higher than the price of generating electricity from gas, and for something that only works for a third of the time. This is just unjustified. I really think that we need to stop, and I actually do have some sense that AR7 might fail, because I can't really see a scenario where it's politically acceptable to sign these contracts at £100, which is where it might end up, and so it could be anything up to £113. Where it might end up, and so it could be anything up to £113. So I think that it would be politically very challenging for that to succeed, and so there's every chance that actually, you know, keir Starmer steps in, fires Miliband and has a reset, because you can't perpetuate this narrative that renewables are cheap and you definitely won't deliver the £300 saving that was such a huge part of Labour's election campaign. So I think both reform and the Conservatives should be aligned in terms of potentially scrapping AR7 when one or other of them wins the next election, where I think it's pretty unlikely that Labour will be re-elected.
Speaker 1:And then you know they also need to look at what they can do to limit the harm from the historic subsidy rounds. That's obviously more challenging. You face a real risk with harming investor confidence if you start messing around with contracts that are already in existence. I think you have materially less risk when they're contracts that nobody's yet signed, because then they know what they're getting into and it's quite difficult to argue that you didn't know, when everybody was saying so publicly, what would happen. But both Conservatives and Reform are attacking the higher administrative strike prices. They're pointing out that we can see supply chain costs and financing costs have gone up and just pointing out that you know these are 20-year contracts and they are far too expensive and I think what I'm interested as well is that I've seen previously as well, you said that for this criticism to work, the opposition parties need to be very clear.
Speaker 2:To be fair, I think Claire Coutinho's letter was very clear and you'll see now guys up on screen that the letter sent by Claire. But I think that one of the things I've heard you say that's from a very legal framework point of view, that if all the opposition parties are very clear that these prices are happening, is that then contractually they can't be stopped. Say they win pound 29. Obviously we've we've potentially got four more years of the majority government at the moment. Is that if they're giving four years notice, you would say that then all of the opposition parties they unite behind this. It gives a very clear legal message that they've been pre-warned that if there's a change in government, this pricing mechanism will change to actually almost give consistency a message.
Speaker 1:Yes. So I mean with the caveat that I'm not a lawyer, but I do have some experience of litigation and so under English law you're expected to mitigate your losses. And so if you, as a sophisticated investor, and the English courts do distinguish between sophisticated and non-sophisticated parties, so if you, as a sophisticated investor, sign a contract in knowledge and given that reform is currently leading in the polls, so it's not far-fetched that either reform or the Conservatives could win the next election, and let's assume they both deliver the same message then if you, as a sophisticated investor, sign a contract knowing that there's a high chance that an incoming government will cancel that contract and you sign it anyway, you're going to really struggle to persuade a court that you've satisfied that requirement to mitigate your losses. So I could see a scenario where they bring a breach of contract claims against the government that the court finds in their favour that yes, there was indeed a breach of contract, but then award zero damages and potentially not even give them their costs. And so I would really think twice if I were an investor about whether this is really realistic.
Speaker 1:So perhaps you would be able to justify something in the £75 to £85 range, but going beyond £85, I think you're going to be on very shaky ground, and anything close to £100, I think would be completely. You know you'd see a very high chance that those contracts would get cancelled, and so investors really should adapt their auction strategies accordingly and potentially just not bid above £85 on the basis that the risk will be too big. And if that's not enough for them to finance their projects, then just don't do the projects. I mean, there are many other places in the world that they could choose to deploy their capital and many other ways they could deploy their capital. They don't have to build wind farms in the UK.
Speaker 2:And can I just ask as well, on wind, before we sort of move on from this subject, do you feel that partly some of this has been driven by the fact that you have Ed Miliband going into a general election talking about his support for the industry?
Speaker 2:You have his first year of office, but what's happening simultaneously at the end of time is politicians can't stop the business world, they can't stop share prices and they can't stop under demand for companies you've had one of the big wind players like Orsted have really difficult financial times and we'll probably do a different episode on that. But you know, during international energy week there was difficult reports coming up. There's been a lot of change in the senior teams. There's been, you know, from it being at one point, this potential unicorn in the wind industry is now real concern from investors. Do you think ar7 in part has been to try and make sure that, whatever cost, that the british government makes sure it pulls wind industry out and so it can work? Because it just feels like almost, if you're a politician, you're in a nightmare scenario, the people you want to deliver it having unbelievably difficult financial times.
Speaker 1:But the reality is it comes from lack of demand from from the marketplace uh well, it comes from lack of demand at the price that they're now being required to charge, and this actually goes back to 2018, because, um so and I think this is where we we have a big issue with politicians and also with officials just not looking at the right data. So the wind turbine manufacturers, from 2018 onwards, started to incur billions of pounds, or billions of dollars, as global industry, billions of dollars in annual losses. Now, subsequently, when you look at that, some people say oh well, yes, there were losses, and there was COVID and there was Ukraine. Well, these losses predated both COVID and the Ukraine war. As I said, they started to manifest in 2018. And so you can't really attribute that to anything other than the fundamentals of the industry.
Speaker 1:What we've seen subsequently is that the OEMs have been working very hard to repair their balance sheets, we've seen them tightening on warranty conditions and we've seen them putting up prices materially. I mean, vestas has put its prices up hugely. I put a blog out about this yesterday, in fact, and showing the cost increases of Vestas turbines, and those cost increases look like they're here to stay because they're not just driven by higher raw materials costs and higher financing costs. They're driven by this fundamental need. The OEMs have to restore their profitability and deliver returns to their own investors, and so that is not, that's not going to be reversed. You're not going to go back to this territory of turbine manufacturers selling turbines as a loss anymore, so that pushes the financial pressure then onto the developers, and we've seen the consequences of that. Allstead's financials have degraded quite significantly, and of course, their response is to require increasing subsidies, and so at some point there's going to have to be a limit, because consumer pockets are not infinitely deep, and there's also the political harm that I just don't think you can sign a contract anywhere near £100 anymore.
Speaker 1:And so this is I think we're going to have essentially a come to Jesus moment on the wind sector, which is this stuff is just not economic, and if we just can't make the economic work, then we just have to think of something else. And so, essentially, the blog I posted yesterday says that I think this is probably make or break for Miliband in his role, because if he has a failed AR7, there's no way he can deliver the Clean Power 2030 ambition. I mean, I don't think he can deliver that anyway, but one of the very few levers he has to try and deliver. That is, increased subsidies for wind and solar. But if he can't get the auction away at a price that's going to be politically acceptable and that fails, then I think he's going to be out of a job and at that point hopefully we can have an energy policy reset and base it more on you evidence and data. You know there's really boring things. That's um, you know, rather than ideology and fantasy now.
Speaker 2:Not everyone loves you, catherine, um, and it's fair to say that, whatever the opposite of sitting on the fences, you're very good at doing so. I looked at one of the critics of your report because what I do like is you put your stuff out very publicly. Um, if anyone hasn't seen katherine's post on linkedin, go on linkedin, and it's almost a very good debate because people can comment. But you have right of reply, and I thought it was worth raising one of the criticisms, um, from a guy called bob ward at lse. I don't know if he's an academic at lse, a student or never went to LSE in his life, but that's what it comes up with when we look on the post and he argues that your report underplays the gas crisis, it misapproaches some social policy costs. How would you respond to that? Because that seems someone who kind of feels that your numbers are wrong because of those areas.
Speaker 1:Yeah, but that sort of comment is pretty unhelpful because you know, oh well, I think you've underestimated the gas crisis. Ok, well, please demonstrate the way in which you think I've underestimated the gas crisis. Please set out your calculations and your methodology of how this should be done. Differently, if you think that I haven't taken proper account of the environmental policy costs, explain how that is. Don't just throw that out there as an assertion um, you know that doesn't move the discussion on any.
Speaker 1:Uh, I had quite a detailed comment on yesterday's blog about um, the ar7 administrative strike prices, and someone was saying I was cherry picking the data.
Speaker 1:And then this huge post that was cherry picking lots of data and I'm like, well, ok, well, it's good that you've actually told me which data you're cherry picking and I can respond to that and say well, you know.
Speaker 1:He was saying, for example, that turbine prices will fall when raw materials costs fall. First of all, we don't have any visibility on when that might be, but we believe, and many people believe, that these increases are structural because the OEMs are repairing their balance sheets and they're not going to go back to a position of selling at a loss. So you need a massive reduction in raw materials costs to be able to materially reduce turbine prices, not just going back to where they were before, because where they were before, the OEMs were losing money, and so you know the the you have to look at the best data that you have. That's what I did in my report and I was pretty transparent about where my data came from. If people don't agree with it, they need to really set out their arguments and not just make assertions uh, well, I've got another one then for you.
Speaker 2:That you're like and I liked about this was how like vague their, their, their, their window was. So it was about they felt you overstate policy costs, in that they felt the policy costs of government, and this way I laughed a bit instead of saying 11 or 16, they said they're between 11 and 16. I was like, wait a minute, in a whole energy system, that's mega numbers, um. And? And they felt that your calculations were much closer to 25. Where do you think the differences comes from? And I always actually have a feeling that policy costs are underestimated because things like time delay, things like waiting for decision makings, the flip-flopping decision actually you can't sometimes ever calculate that cost and I'm just interested where you got your policy cost numbers from in terms.
Speaker 1:So I got that from off gem data and so unfortunately, off gem has a bucket for policy costs in the price cap but it's not exhaustive, um, and so if you look, you have to really dig into all of the different annexes in the price cap, but it's not exhaustive. And so if you look, you have to really dig into all of the different annexes in the methodology and you find that they attribute the contracts for difference and capacity market costs. They include those in the wholesale component and they're not wholesale costs, they're policy costs. And in fact I could have stripped out the carbon pricing from the wholesale as well. I didn't, but I could legitimately have done that also.
Speaker 1:So if you look at the Ofgem headline policy cost number, it's not complete because Ofgem spreads the policy costs around different buckets in a way that just I believe isn't justified. Now I explained in my report exactly what I was doing with that, so people can disagree and that's fine. But I think it's quite difficult to argue that the cost of renewables subsidies and cost of renewables backup are wholesale cost of electricity and not policy costs. And why would you put the contracts for difference in the renewables but in the wholesale bucket, but not the renewables obligation and the fit, and so I said we're going to treat all of the subsidies the same and we're going to put them in the policy bucket.
Speaker 1:But then I had to reverse engineer that out of the off-dem numbers, because I mean, they are all there available in the annexes, but you just can't take their headline numbers, and this is what a lot of people do. They just look at the headline headline and they go, oh yeah, policy costs often breaks it out. So that's, that's great. But you've really got to dig into what do each of those buckets represent? And so I think that's where you get some of these differences is that you know Ofgem is putting things into different buckets, and I don't think that's correct, and so I adjusted for it no-transcript as a business leader and and you as an energy company.
Speaker 2:Um, the other thing that I'm interested in is what assumptions you made around um capacity, factors of the systems of design and in terms of, obviously, to get the 220 figure, you had a base mark in terms of what was the sort of reliance on gas and nuclear as the alternative scenario, as the sort of counter way forward well, no, I didn't need to make assumptions around around that.
Speaker 1:I said if we took the wholesale gas and electricity prices that we know happened the real, true wholesale gas and electricity prices and then we just assume that the margin that we'd pay for retail is going to be consistent over that period of time, then what's the number that we get? Because you don't need to make any great capacity adjustments because the asset base that you'd need is still the same asset base. Now it won't be going forwards because we're going to have about a third of our gas fleet and almost all of the nuclear reactors retiring in the coming years. But over the last two decades we haven't really had the need to build very much more capacity.
Speaker 1:The final years of pre-privatisation and then the dash for gas actually saw a huge amount of conventional generating assets being built, and so that asset base has been sufficient. So there was no need to make assumptions around that. We just used the assets that we already had all the time instead of just part of the time. And it's the margin that matters, right, it's, it's not the um. Yeah, so I said that. You know, you just have that same margin.
Speaker 2:Uh, spread, spreading, ongoing and that makes perfect sense to me is ultimately looking at the market scenario and actually how worse off the consumer is in terms of at the end of it as a result of the policies. Are you concerned by maintenance costs? Because it feels like to me. We've had decades of underinvestment and it's not a unilateral policy, this of international governments, in that you know we're going to be at solar and storage this September.
Speaker 2:It's clear that the Chinese government 15 years ago made a very positive assertion that we need to be world leaders in this. They've got massive market share, but it feels like in our country, through successive politicians, through successive market conditions, there's a worrying lack of investment in just maintenance of facilities that we had. And do you see future generations burdening that cost? It's almost like not repairing a house when you've got funds but suddenly generation four that comes into it has all the problems to deal with from, you know, the equivalent of new roofs and new boilers. Do you see that happening on an industrial scale with the brit infrastructure, with Britain in a way?
Speaker 1:our capital base as well and our ability to pay for this stuff on wind and solar in a way that's really just not justified. Now, if we look across the network piece, there was a huge investment spike in grid equipment in the 1970s. Now half our power lines date back to the 70s. That's not such a concern because power lines last a long time, but a third of our transformers and 30% of the switchgear were installed in the 1970s. That's a much bigger concern. Some of those assets are reaching end of life and they're not being replaced at the rate which they need to be.
Speaker 1:A third of our gas fleet was built in the 1990s. Now NISO has said that we really need to retain the entire gas fleet. We need 32 gigawatts of gas to be available for the foreseeable future because to cover the times when it's not windy and sunny but you know, gas plant typically lasts 25 years and we're coming up to that now. It's their end of life. If they were built in the 1990s and now, by 2030, they'll be like 35 years old, some of them. Yes, they had major upgrades in the 2000s, but now you're coming into a situation where they're going to need another big round of major upgrades or flat out being replaced. Now, unfortunately, the lead time for a new gas turbine is now about eight years. I'm told that the lead time for a new rotor is probably around five years and that the lead time for the components that you need for a major maintenance is about a year and a half. We know this.
Speaker 1:On the infrastructure side. It's about two or three years for a regular transformer and something like four years for a super transformer. So there are these huge supply chain constraints and if we lose a third of our gas fleet, so that's 10 and a half gigawatts. And then we're also going to lose something like four gigawatts of nuclear, so 15 gigawatts of generating capacity. That's at imminent retirement risk over the next five years and there's no plan to address this.
Speaker 1:The only thing that's really happened is the renewal of the biomass subsidies, because we couldn't have really coped with the closure of Drax against this backdrop. So we're not seeing increased procurement in the capacity markets, which is what we'd need if we were going to replace these ageing gas assets. And unless somebody gets a move on with this, then we are going to face rationing. I can't see any realistic alternative. These old gas assets are going to start to break, and when they break, then you're going to potentially have to wait a number of years to just get the parts to repair them. If you are inclined to repair them, which, unless you're paid a decent slug of money, you won't be so, uh.
Speaker 2:So I think this is a really serious looming problem and, um, I really hope that people start paying more attention to it so if then there was a katherine porter energy cross-parliamentary tour and you'd have Ed there, you'd have Claire Coutinho, maybe have Richard Tice, which country would you take them to? Or or state within a country, maybe, or area, and say they've nailed both on the energy trilemma really good, low costs and they've also nailed that future proofing of their energy system. What gets you excited when you look at those outside of the uk and you think I wouldn't mind a piece of that energy sector in the united kingdom?
Speaker 1:well. So I don't think anybody's managing to do it in a way that's completely reasonable. Um, I mean you lookOT, for example, which is quite a good analog to the GB system, and they are now seeing this. If you build out more gas power stations, then you can utilize your wind farms to supply data centers and use the gas to iron out the intermittency. But that's because they can build lots more gas power stations, although they also face the lead time issues that 60 hertz turbines also have, you know, eight lead times as well. But they have at least been putting their orders in, which we haven't been doing. But I don't think you can really point to any country and say, oh well, they've got all the capacity they need. They're addressing affordability, sustainability and security supply all at once, and also people are typically, like us, prioritising the wrong things. The top priority actually should be security of supply.
Speaker 1:11 people lost their lives in the Iberian blackout and that was in Goldilocks weather conditions. A winter blackout in the UK would be very likely to cause significantly more harm and so obviously that's important to avoid. Poverty and affordability are the next most important. In a typical year, ons has stopped publishing these statistics, but historically between six and eight thousand people were dying prematurely every year as a result of fuel poverty and not being able to adequately heat their homes. So you have to look in terms of proximity to harm.
Speaker 1:Blackouts hurt people immediately. Fuel poverty hurts people over weeks and months. And then you know climate issues. It's a much longer term concern, and so you have to take that into account, and unfortunately, we've had it completely the wrong way around. We've prioritised spending money on generation that's very expensive and only works a third of the time, ignoring both security of supply and affordability in the process, and that's really going to come and bite us, because we've basically spent all our money that we had available and now we don't have any money left to go and build the gas power stations that we're going to need to secure our electricity supplies into the next decade.
Speaker 2:Now, catherine, just before we go into our quickfire questions, just a big shout out to our sponsors. Today We've got AIM Recruit, who deliver jobs and roles. So if you really want value for money, you don't want to spend hours on Indeed not finding the right candidates, or you walk into a sales team or delivery team with just family members and you want the very best people, go and follow aim recruit. In the notes below, and also, although the website's not live yet, we can proudly say that the wall power club will be partnering the spectator for its energy summit on november, the 24th. Many of the partner opportunities have gone, but there's still a few left, so feel free to get in contact with me. But, catherine, how can people get in contact with you and your professional services and you run WhatLogic, and what does WhatLogic potentially offer customers and people interested in this area?
Speaker 1:So I'm a consulting business. I work with people across the value chain. I've got clients around power generation, regulated utilities, think tanks, regulators, not just here in Britain but around the world. And because also I have a background in finance, I sort of cross over between energy and finance and look at project viability and investment strategies and things like that. In the energy space. The thing I do the most of these days actually is writing reports. Historically I did a lot more sort of commercial contract negotiation. I still do some of that. I have one client in the power generation sector where I'm literally on daily calls with them about their dispatching, um. But a lot of my work now is more focused around policy and regulation and how that impacts people's businesses. And you can write. If you just google my name, uh, you'll find my information guys, we'll make it even easier for you.
Speaker 2:We'll put it in the show notes. Uh, for what I did. But I think you can tell katherine's work is very detailed, going into the numbers, and I think from that coffee I had with neva a few months back, we've got some really hard-hitting answers uh, today. But, katherine, there's a few quick fire questions that we ask all of our listeners and guests on this podcast. We do go out to over 70 countries now across the world but we've got a few sort of big quick fires that we ask everyone. You've obviously mentioned a lot that Ed could be doing in the next 12 months, but what's one thing you'd like him to deliver in the next 12 months, starting from today?
Speaker 1:Okay, I think the single most impactful thing that he could do would be to sign a deal with kepco and build five to six of their apr 1400s in the uk and legislate to make this happen, bypassing all of the regulatory processes brilliant, fantastic.
Speaker 2:So that argument of I want nuclear, but not my backyard would not stand under a porter government.
Speaker 1:I like it um but also I mean we um. So if you look at the kepco design, it's not certified for use here in the uk, but it has been certified in the us and also in europe. And the us has a lot more stuff to worry about than we do hurricanes, tornadoes, earthquakes and all the rest of it. So if it's good enough for them, why should we then spend years working out that it's also good enough for us? We should just legislate that it is and move on brilliant, fantastic.
Speaker 2:I like that thinking. Um, we have a lot of directors of energy businesses listening to this podcast. There'll be some probably from the older technologies and nuclear that were cheering for you today, and some from wind that I'm sure going to be on the phone to me when this comes out saying they want their right of plight, and of course, we'll give it, guys, because we love debate. But what I'd say is come with your numbers, because we will challenge you back with some of the numbers that katherine has brought us today. But what's the message that you would like to give to energy directors listening to this podcast about what they should be doing in the next 12 months ahead?
Speaker 1:so I think that very much depends on where you sit within the energy sector, I think. If you're in a traditional oil or gas producer, um, there's a real, really strong need, and I speak to ceos in this sector and I really try and encourage them to take back the narrative. Uh, that too long environmentalists have driven the conversation when it comes to oil and gas. Oil and gas are fundamental to our everyday lives. We wouldn't be doing this podcast now if it wasn't for oil and gas. Oil specifically you would have no modern agriculture without natural gas and you would have no modern medicine at all without oil. Everything you will see in a hospital, apart from the people pretty much made out of oil. So we need to really persuade people of the value proposition. When you hear people talking about just stop oil, it's such an ignorant thing to say, because modern life would simply not be possible without it. One of the responses to my report was oh, what about the externalities of the climate harms caused by oil and gas? And I'm like what about the externalities of the fact that oil and gas lifted billions of people out of poverty, created modern medicine, modern agriculture, modern technology? You know where do you draw that line, and so I think we need to have a much fuller and more sort of grown up discussion around this and not just be so throwing stones around. Oh, you're destroying the planet. Well, okay, but you know how would you feel if you didn't have any medications, because just about all medications are made out of oil. Chemo therapy drugs are all made out of oil. So if you happen to be an energy supplier, I would be lobbying for significant market reform. I think Ofgem is now very on board with the need for this lobbying for simplification, for removal of a lot of the non-supply obligations that suppliers have. I think Ofgem is very open to these arguments now in a way that it hasn't been historically and also the need to reset. Ofgem recognises that its language around supplies is too negative, that they themselves are contributing to the lack of trust in the sector and that the suppliers themselves and Ofgem and Desnas need to work together to restore that.
Speaker 1:If you happen to be a renewables developer, then I might suggest you consider projects, not in the UK, because you know I think well. First of all, I would say make sure your supply chains are clean. Don't buy stuff from China. You know, we don't need all that forced labor in the supply chain. Make sure that you can sleep at night in terms of where your raw materials are coming from and the processes around that. Where your raw materials are coming from and the processes around that and I think in many cases that's not the case Be aware of the full supply chain implications on the environment of your activity and don't build wind farms, particularly when you know the output can't be used. I mean, just because you can do it doesn't mean you should, and I think there's a real obligation on everybody within the sector not to waste customers' money, and building wind farms when you know the output can't be used because of grid constraints is just not a responsible thing to do.
Speaker 2:Then going to the consumers, because the podcast always holds the consumer to account. Because the podcast always holds the consumer to account. Let's say we've got consumers across the world and they've been told things by speakers on the podcast this season from insulating their houses better. But what do you tell the consumer? Because I don't particularly want to leave the UK. There's something I enjoy about walking into Wetherspoons. There's something I enjoy about walking along the Thames and having a nice life in Wimbledon, although I've had plenty of offers to move abroad and you know I've worked abroad but I like the UK. But what, as a consumer, should I do in the next 12 months because we've got these high energy prices? What would you suggest, as a consumer, I should do?
Speaker 1:So I mean that is quite difficult because consumers are not homogenous. If you are more affluent, then you obviously have far moreogenous. If you are more affluent, then you obviously have far more choices than people who are less affluent. You can, for example, look at improving your insulation, acquiring flexible energy assets, buying backup generators and thinking more broadly about how you want to heat and light and power your home. Now I do actually have a backup generator. I've got a diesel generator, but that's not actually for the reasons that we've been discussing.
Speaker 1:You might gather from all this in the background that I live in a fairly rural location. Actually, we're the last house on both the gas and electricity network and we're not on the water at all and unfortunately our drains are lower than our septic tank, so we require electricity to pump our waste into our septic tank. Given our electricity supply is a single phase little wire coming over several fields to get to us, I am somewhat concerned about resilience in storms and things like that, and therefore you know I take appropriate steps, and so everybody should try and think about their own specific context. If you have equipment in your home, like we do with our pumps, that you just cannot cope with, that you can't live without them. You know powering medical equipment, for example, you really need to go. You know, think through what happens. You know if things go wrong and you have differing levels of vulnerability within the grid. We're in a fairly vulnerable location here, being right at the very end, and we're not in a particularly remote place here. It's just the way the grids are organised. You'll find yourself just at the end of the line sometimes, which is what we are.
Speaker 1:It's significantly harder for people who are in rented accommodation and on low incomes, because they just don't have the money to go and insulate their home better and change their appliances, and even if they did well, they can't do it because they don't own the home. They don't have the right to start interfering with the fabric of the building when they're renting it, and so this becomes a significantly bigger challenge for them, and you know it's very hard to know what to advise other than if you're concerned about your energy bills or your energy consumption. Citizens Advice is a great source of support, and also all of the suppliers have hardship funds available that people can access, and British Gas actually has a hardship fund that's also available to people that are not British Gas customers. That's not very widely known, but you don't have to be a customer of British Gas to access their hardship fund. Now, it's not necessarily easy to access, but nevertheless, that is that opportunity there. But nevertheless, that is that opportunity there.
Speaker 1:And also make sure that if you are in hardship and you're struggling, that your supplier is aware of this, because they have duties to not make your hardship worse if you like, but they can't help you if they don't know that you need help. And so you really do need to engage with your supplier. Don't just sort of panic and ignore the bills. Talk to them because there are um, there is support available and um. You know it'll only get worse if you don't address it. So, however frightening and intimidating that might seem, it's better to confront it. Talk to your supplier, um and they. You can try and work with them to come to a solution rather than just hoping the whole problem will go away really good advice there, katherine, I think our listeners to take on board.
Speaker 2:Um, there's certainly a lot of focus actually that people don't know about, but if you follow those areas that katherine said really can help you out the situation. Now a bit of fun to end with. Everyone likes the dream of coming a millionaire or even billionaire. We've had some of them on the podcast, um, and I could tell you're probably dreading this question for the last hour. But where in the energy sector do you think you could still make, as an entrepreneur, millions or billions but also actually deliver good value for money to the, to the whole system? Is there an area or do you think now it's just the ballpark of big companies?
Speaker 1:I mean, if I was looking to deploy capital within the energy sector, I'd probably just want to go as far upstream as possible, and so you know, I think there's always going to be value in oil and gas production and in the mining. You're still going to need an awful lot of stuff to build out your grid infrastructure and to replace all the stuff that needs replacing, and I would say conventional grid operators are probably not a bad source of returns. If you're going a little bit more into the midstream, I think the downstream is pretty uninteresting from an investment perspective. Just qualify this, as I'm not authorized to give investment advice. I'm no longer FCA authorized, so don't be.
Speaker 1:You know, go be going away and saying that I've given any tips or whatever, because that's not the case. Um, but uh, yeah, I mean I'd say the more upstream you are, the more protected you're likely to be. Um, however, if I were to find myself with a billion pounds, then I would be doing other things with that money.
Speaker 2:Fantastic, fantastic. Catherine, I'd really love to thank you for your time this evening. I think, listeners, you've heard that we have lived in a country that, in 2011, went from parity with its European neighbours and some of its worldwide neighbours, but in 2024, the parity is gone. We're paying two and a half times more our power against some of the worse performing places, and there's some even cheaper places than that. We've got huge subsidies and essentially, I think what Catherine Reporter's report on net zero done has laid down a marker and said look, I've taken the data that's publicly available for everyone and I'm asking the question the real cost of net zero? This podcast doesn't back any winners or losers, because we're about the agnostic energy sources and technologies, but what we are saying that it's right that we have people that do research like Catherine to really put onto the map the questions about what value does that technology still need supporting versus other technologies like we discussed today, like nuclear, that could have a significant role, and essentially, we might be chasing things that are for political arguments rather than best value for the consumer.
Speaker 2:Catherine, I'd love to thank you for your time today. It's been absolutely amazing. And is there any public conferences or anything like that people can catch you. If they've enjoyed this, then they'd like to see in person. If people want to see me in person, I will be at british motor show coming up and I will be at offshore europe in aberdeen, because we've got many friends in the upstream sector on this podcast and yourself, katherine. Is there anywhere that people could catch you to see you live?
Speaker 2:um, yes, but don't ask me off the top of my head because I've accepted so many engagements for september that I've like lost track fantastic we will, we will, we will, uh, happily send you a link to uh, what logic's website, and uh, and, and so it'll definitely be a 10-2 trading week.
Speaker 1:Uh, I'm taking part in an lng panel there. I'm speaking at the world energies summit. I am I. There's a bunch of other things, though, as well, through uh late q4, q3 and q4 that I've been uh invited to. So sorry, it's quite a lot so and I'm just fantastic.
Speaker 2:Thank you for your intelligence.
