Episode Transcript
Charlie Hello everyone and welcome to the next episode of the Be Inspired series. My name is Charlie Walker and I'm the Deputy CEO of the London Stock Exchange. I'm absolutely delighted to be joined here today with Alistair Phillips-Davies, the CEO of SSE, since 2013 I believe it is?
Alistair Yeah 2013 now, thank you for reminding me of that.
Charlie No problem at all, thank you so much for spending the time to speak with us. So since 2013 I'm conscious of an enormous amount of change, particularly in SSE but the industry as a whole, can you just talk to us a little bit about the journey that the company's been on over that time?
Alistair I mean I'm not sufficiently old to have been there at privatisation but I joined the company towards the end of the 90s and it was a very different organisation then, probably still coming out of some of the sleepy nature of having been a civil service type business and we transformed it quite a lot. Towards the end of the noughties we actually got more heavily into renewables, a big deal myself and the finance director at the time did it over in Ireland to buy Airtricity and things like that. We were really pushing ahead, building big wind farms and things of that nature. Come 2013 when we actually got into that decade, everything got a little bit tougher I think. There was a real obsession about consumer prices and things like that, so my first five or six years were quite tricky. Two months after I joined the then opposition announced they wanted a big price freeze so that wiped over two billion pounds off the market cap of the company while we're on a road show in America. The following year, the Competition Markets Authority investigation into that whole retail market. 2015 came along and the government that won at that time then decided they wanted a moratorium on onshore wind. It was a very, very turbulent time I would say. And it was definitely tricky and although throughout that period we stayed very, very committed to that sustainability journey and that renewables journey, it wasn't that easy and actually we got later in the decade and then the main opposition then wanted to look at renationalising networks businesses. We do networks, renewables and flexibility, those are our three big businesses. So pretty turbulent times. Then sort of probably 2017 we decided we're going to exit the retail business in the UK, domestic retail anyway and sort of get more focused on building things. And that probably took a while to do. It probably took us over two years to exit that business. Ultimately we sold it to OVO which I think was a good deal for them and was certainly a very good deal for us. And we then also rationalised what was quite a sprawling business. We're in a lot of different areas, we got out of gas networks, we'd set up a waste to energy business, we pumped about a third of a billion into that and got a billion back for it in five or six years, so that was helpful. So we kind of rebuilt a balance sheet to reinvest and really double down on what we'd done, particularly in renewables and across that whole sustainability space. And then we got into this decade and you know we had a very strong time. Difficult maybe during Covid but we committed, we didn't want any government money, we weren't going to lay anybody off. We had a really, really strong commitment to making sure that we actually built staff and built teams. It was an opportunity for us to actually take on board a lot more people during that time. I think we built a much stronger brand as an employer, we got a stronger better workforce and that really helped propel us into more of that national champion role around green energy, sustainability both here and in Ireland.
Charlie It's amazing about sustainability because we see that at the Stock Exchange, you know whether it's on the equity side or the fixed income side or the funds business or the data side, I mean just an enormous, enormous focus on it. I was reading some of your material ahead of today and know that you're involved in a couple of different projects, Dogger Bank and Viking Wind Farm. Some listeners may not be sort of overly familiar with the scale of these projects, are you able just to talk about sort of what they're trying to achieve?
Alistair Yeah sure. If I go back to that piece in time when we bought Airtricity which kind of really kick-started what we'd done. We were a bit small in renewables, undersized. To this day, that remains the biggest acquisition we ever did for you know well over a billion euros. We built a wind farm then called Greater Gabbard, an offshore wind farm and that was about a billion and a half pounds something like that, back in 2010-11 time. If you fast forward we've done a couple of big ones since, they would be more like three billion pounds of Beatrice and Seagreen up in Scotland. But then come to something like Dogger Bank, that's the world's largest offshore wind farm. In today's money it would be a lot more because of inflation, but back in 2019-20 when we finalised the financing package that was just over a nine billion pound wind farm, six billion pounds worth of debt. It'll be around about 900 feet high if you go to the top of the turbines there, they're the world's biggest turbines and we're installing them currently. You know, huge amounts of steel going into some of those things. It's actually the far end of the wind farm is closer to Norway than it is to the UK. So it's a long way offshore, even at 900 feet high you're not going to see any of those turbines because it's right in the middle of the North Sea. You know those turbines are so big, one turn of a single turbine, and there'll be over 280 there, will power a house for two days.
Charlie Right okay.
Alistair So you're collecting a lot of energy. So extraordinary projects there, extraordinary sizes. Then even onshore now, Viking that was roughly a 500 million pound wind farm. It might be one of the most productive in Europe, it will certainly be the largest in the UK. Being on Shetland, the wind blows a lot on Shetland if you've ever been there, so that's why it's very very productive. And there was a unique 600 million pound cable link put out to Shetland as well to hook it into the grid and we got that finally energised and done last July, but that had taken nearly 20 years. We may touch on planning and you know the 'builders versus blockers' debate and all that sort of thing which is definitely out there at the moment. Trying to build these things is a big issue and the network piece out to Viking, you know that actually isn't that big a project these days. 600 million seems like a lot of money and about 170 kilometre cable. We've actually just finalised a much bigger link with National Grid that we're building, a four billion pound link down the side of the country, 370 kilometres to bring a lot of the wind and renewables from Scotland all the way down into the sort of North Midlands part of the country. And there will be more of those and you know it's fantastic progress we've made on that.
Charlie It leads me on naturally to the next question which is we hear a huge amount in the media around the move to renewable energy in the UK and it seems like there's been great progress made. I saw of sat that last year 42 percent of all the electricity generation in the UK was from renewables. How do you feel the UK's fairing relative to other countries at the moment and do you see key blockers to sort of accelerating that? You mentioned 20 years for the Shetland's link as an example, we hear a lot in the media about planning being a problem. How do you think we're sort of doing overall?
Alistair So I think the UK is doing very well. The UK created the biggest offshore wind market in the world and it you know it remains that maybe China will overtake at some point, it's always difficult to know exactly what China's doing, but for offshore the UK's been the place that really has led the world. For interesting reasons, probably about NIMBYism because building onshore became so difficult people went offshore. You know we're very fortunate, the period probably from 2010 to 2020 we drove down the cost by 65 percent something like that with industrialization of processes and advancements in technology so offshore wind became a lot more economic which is why it's been big here. I think overall the UK's doing pretty well. It's doing better than many other countries and it's actually important in a in a context let's say of the wider Europe. Europe has relied for decades on cheap Russian gas to power its economy that is no longer there. Europe needs to find a way to actually power its economy. You know in America they're going to frack gas, it's not something that works here, so therefore renewables and nuclear to some extent, which equally some European countries like Germany have sort of abandoned, are very very important in terms of how we actually get energy going forward. So I think UK doing well, the key block is just time to get there. I think successive governments have wanted to take action. It's interesting with a big majority for this government, we've seen real progress in what they're doing. They've got a very important planning act coming up. We need due process but should due process take six, seven, eight years or should due process you know should we be able to get you know planning done in 12 months if all the documents are there and in and filed properly? And we've got a number of big projects. So the world's next biggest offshore wind farm, even bigger than Dogger Bank, that'll probably be 15 billion plus of spend and bring thousands of jobs to Scotland and potentially more supply chain here, so creating a really really great story for industrial strategy so we can export to Europe and the North Sea for decades to come. That's been sat on a minister's desk for over two years now.
Charlie Which actually leads me on to the next question which I was going to ask, which is about what you're looking forward to from an SSE perspective? I mean major projects, anything else that you're hopeful for in the in the future? Faster than two-year turnarounds probably is one of them.
Alistair Indeed, indeed. Berwick Bank I have already mentioned. It'll be over 4,000 megawatts you know for that wind farm. Even bigger turbines, a little bit closer to shore. We have one project alone in Scotland that will more than double the long duration storage capacity of the UK. Three million plus homes for 24 hours, it's very simple old technology, just literally pumping water up a hill. That's Coire Glas up in the North of Scotland. A two billion pound plus project, we've already spent 150 million, but again here probably some policy issues that we've got there that we need to overcome, particularly with the regulator, so that needs to be done. And if I took something over in Ireland, Ireland really struggling now for power, you know their system is very, very constrained. Struggling as well because they've got all the big hyperscalers there with their data centres. And Ireland really led the way with the onshore but have done nothing on offshore. So we've got a big 800 megawatt wind farm there, there'd be you know a few billion euros to put in and would give them a significant boost to their grid. Again we've probably been ready to do that for about four years. And so all of these things again require, it's about policy, it's about planning. And then both here and in Ireland there are issues about grid connection. Wherever you go in the world you need a grid connection and you know in this country it's a fantastic thing that we've seen particularly from this government, they've got a big plan now for how they're going to connect everything up and we're going out there and sort of getting into execution.
Charlie So It's a case of the planning permissions and all the process, but at least it feels like the technology is there as long as the investment and the will is there?
Alistair 100%. So we recently did a project with the regulator Ofgem, and that secured a 350 million pound new unique high voltage cable factory in the north of Scotland that Sumitomo are building. We need to get more of those factories into this country, so as the big projects move forward we'll also bring in big manufacturing benefits to the country.
Charlie So on the renewables side we often hear about the expansion there but also the need to keep a base load just in case the wind's not blowing or the sun's not shining. What are your thoughts on how we're doing on that?
Alistair So I think in terms of when the wind doesn't blow, which it is today clearly and the sun doesn't shine, how do we deal with that? You need flexibility. At the moment that flexibility is really coming from gas. I think going forward we can do it with projects like Coire Glas. You can get some of it out of the pump storage, that gives you really bulk storage. We own the biggest batteries in the UK which are actually the lochs in Scotland, which sit behind a lot of our hydro plant because we're the biggest hydro operator in Scotland. Equally we're deploying a lot of batteries. We've either deployed or have plans to deploy about a thousand megawatts of batteries, which will probably be up to about a billion pounds worth of investment. You don't need them everywhere but they are useful. And then on top of that we'll need things like carbon capture and storage, so using gas plant and you can take out 90 plus percent of the carbon. And then running on hydrogens, we have a unique agreement with Siemens to develop their latest gas turbine to be 100 percent hydrogen burning. We installed one of those, it's the most efficient turbine in the world at Keadby, which is which is near Scunthorpe a couple of years ago. We finished that, so that's up and running and that will form the basis of a whole fleet of plant across Europe. They're at least 10 percent more efficient than the previous generation, so they work you know an awful lot better, very, very flexible as well. And with the ability we'll be doing some investment that will cost a few tens of millions for us and them between now and 2030 to make sure one that the burners are right so they can burn a hydrogen and then on the back of that we should have secured probably at least a couple of the very early machines that do that for the UK.
Charlie Wow OK. It sounds like incredible progress.
Alistair I say to staff about little old SSE, you know we're building the world's biggest offshore wind farm. We've built the world's most flexible gas turbine with the help of Siemens. We're doing some of the world's biggest transmission projects. We've got a project, well the project we've just finished on Shetland, it's a bit geeky but you can't switch HVDC very easily, but that's a multi-node or a switched HVDC system. It's first one in the world outside of China, and we'll be putting something in that's also multi-vendor, so as we go forward to encourage competition in the market you want to make sure that the Siemens and the ABB Hitachi and the GE machines all talk to each other in terms of the grid, and therefore we've got a project at Peterhead to try and do that. So you know there's an awful lot things that we're trying to do. We'll build what will be the biggest pump storage in Europe for decades with Coire Glas as and when that finally comes through. So we need to be doing that if we're going to re-engineer the system to not be reliant on coal. So you know all the power stations are kind of near coal mines basically or near big gas pipes and we're completely rewiring the system. We're not only expanding the amount of energy it's got but rewiring it to bring it in from very very different places. And you do need to be innovative and do 'world first' because you need to do things differently. If we're going to do that at the right cost for consumers it's really, really important that we get that innovation.
Charlie It's amazing how the topic seems to have become almost you know it's a topic over the dinner table now. If you went back 15 years ago, I don't think anyone would have been talking about EV homes or solar panels on the roof or home battery storage, but it's become common vernacular I guess, partly because of the Ukraine war as you say. People saw energy bills shoot up and therefore they want to control that much much more. There's quite a lot of exciting innovations there. I guess in terms of running an organisation, one of the key themes that we've had with CEOs coming in is talking about purpose-led organisations and really having a mission that people are driving towards. It sounds like you've got no problems in that regard. Do you find that that helps you attract sort of people and retain people, the fact that you are driving so many of these critical projects to the UK?
Alistair It's been a huge benefit, and I think you know the team as well in the in the company have positioned us a bit as the 'green energy champion' so yeah I think all that has done an awful lot to get away from perhaps being a sleepy utility. We're out there trying to show that we're working hard, we're innovating and we're trying to work for consumers. And you know it's not the most important thing in in their lives because they'd rather their iPad works and their TV works and whatever, but we do power all that and we do power all the things that make it work, so I think it's important for us to be in the background but hopefully letting people know that we are working hard to try and provide them with the things that they really value.
Charlie And I think their knowledge is growing. It certainly seems to me that like I say people are much much more focused on this than they were historically.
Charlie Alistair, how do you feel SSE is now positioned for the future?
Alistair So look if I take it in summary, SSE has transformed itself into an infrastructure business that's delivering green, clean energy across the UK, Ireland and now starting to expand across Europe as well. It's also a key power behind the industrial strategy for this country as well, bringing big investments in through supply chain and everything else and our ability to create jobs, really good long-term jobs in all sorts of places across the UK. So I think it's been a really huge success and there are massive opportunities ahead of us.
Charlie Well Alistair thank you so much for joining us for this. It's been absolutely fascinating hearing about everything SSE is doing and also so how you're contributing to the wider you know sustainability agenda in the UK. A pleasure and thank you so much.
Alistair Okay that's great thank you.
