Interview: Nick Winser CBE, chair, Energy Systems Catapult

“There is a need to think positively about reforming business models and market structures.”

“Responsibility for the UK’s energy supplies is a lovely thing to carry,” says Nick Winser as we discuss the most challenging and rewarding times he experienced while on the board of National Grid. “There was an absolute thrill to managing security of supply concerns.”

Winser shares his memories with relish, but also reserved modesty for a man who played a key advisory role to government for more than a decade, providing a voice of reason in moments of apparent crisis – the winter of 2005-2006 when a fire at Rough took that gas faciltiy out of play stands out particularly vividly.

More than that, though, Winser was instrumental in developing the RIIO regulatory regime that now presides over the UK’s electricity and gas transmission and distribution companies, and which injected a new focus on innovation and adaption in the face of the energy trilemma. He also shaped much of National Grid’s current approach to security of supply challenges, designing large aspects of the demand-side tools – including the supplemental balancing reserve – which are increasingly now used to buoy the UK’s energy system through times when the capacity margin looks unnervingly tight, this winter being no exception.

An incurable technophile and problem solver, Winser admits a certain satisfaction with this contribution to National Grid’s ability to deal with the shift to a new world order in energy, a world for which he now has new responsibility as chair of the Energy Systems Catapult – of which more later.

Explaining why the rise of demand-side tools is so essential to National Grid – and the energy system as a whole – Winser gets into his stride on what is clearly a pet subject.

A much more active demand side is a huge opportunity in terms of balancing the system, he says, because it is the answer to the problem posed by the loss of the massive inherent storage in a fossil fuel based economy – the storage which manifests in lumps of coal and ­pockets of gas.

“This is huge storage,” Winser asserts, emphatic but characteristically measured in pressing his point. “Let’s not delude ourselves that the storage on the system is just at Dinorwig and a few gas caverns. It isn’t. Our whole fossil fuel system is one which is based on huge inherent energy storage. That’s important because that’s why, over the years, we’ve been able to say to ­consumers: ‘you use it [energy] when you fancy and we won’t give any price signals to you about when to use or in what volume’.

“The system has evolved in that way because it has huge inherent storage,” he reiterates. “When everyone turned stuff on at once you had a big pile of coal with stored energy and you put that in quicker or you turned up the compressors on your gas station. That made our production side infinitely flexible. When you move away from that, to renewables, you lose all that inherent storage. More than that, it becomes variable as well as not adjustable.

“That’s why it is now so important to get that message out to consumers about the underlying cost of energy at a particular time at a particular volume, through a ­particular vector – whether gas or heat or electricity – so that they can play their part in making the system more economic.

“That’s why demand side is so important and will continue to become much more important over the next ten years. We will see it become a full partner of the ­flexibility of the production side.”

Hearing this fulsome praise for demand-side tools and technologies, it would be easy to assume that Winser was a born adherent of all things distributed in energy. But in fact, self-admittedly, it’s an area of enthusiasm that has evolved gradually over time, and mostly in the past five years in response to the revelations of National Grid’s future energy scenarios work – another favourite element of Winser’s Grid career.

Now a familiar contribution to a growing canon of future-gazing energy reports, National Grid’s energy scenarios work began in the early 2000s when Winser recalls a dawning realisation that the assumptions the transmission system operator had made about the road to a decarbonised society were flawed and uncertain.

“People like me, who had lived through the dash for gas, felt that we had seen a lot of change,” says Winser. “But while that was a big challenge for grid infrastructure, it became clear that the challenge ahead is even greater.”

He plots out the change in thinking: “In the 90s we saw a shift from coal and nuclear to gas. That led to a period of looking at future energy scenarios which were focused on a group of low-carbon technologies – ­primarily nuclear, CCS and large-scale renewables – in the mid to late 2000s.”

This focus was “good and valuable at the time”, says Winser, and led to useful debate about what was a ­“credible” amount of new nuclear to come onto the ­system – our discussion took place before confirmation of Chinese investment in Hinkley Point C and the swathe of nuclear development that will open up – for better or worse – in the UK (see Analysis, p18).

But, along with a flat Earth and other certainties of yesteryear, that line of thinking is now redundant, says Winser, for two reasons. First, because using large chunks of relatively mature low-carbon technology would “as far as we can see today” lead to increasing customer bills, and second, more positively, because of “the reality of community and consumer engagement in energy, distributed generation, lots of solar, the economics of solar PV changing, the capability of demand-side response, the likely development of electric vehicles, the economics and potential of smart homes and smart grids”.

This reality is “going to change everything, right across our energy system” over the next 25-30 years, says Winser, a prospect he finds exciting and compelling. Consequently when he found himself considering how he might keep contributing to the energy sector in a life post-Grid and was approached by Innovate UK to chair a new Innovation Hub with responsibility for optimising the UK’s approach to decarbonisation from a whole system perspective – incorporating heat and gas concerns as well as electricity – Winser leapt at the chance.

“It was the easiest decision I’ve ever made,” he states – but it will not be the easiest responsibility to fulfil.

The Energy Systems Catapult, as well as encouraging the piloting of technologies to solve the UK’s energy decarbonisation challenges, helping new ideas bridge the “valley of death” in mid-stage technology readiness levels, has a big remit to support economic growth. By 2030 it has therefore committed to creating 9,000 new UK jobs and £6 billion of economic value-add by accelerating technologies to market that will not only serve a purpose in the UK, but also in key export markets.

Realising this goal relies heavily on the engagement of the UK’s utility companies, especially its regulated networks, in collaborative innovation programmes with a community of agile and entrepreneurial technology innovators – large and small – as well as universities.

Working in such an environment of fast-paced, open ideation and rapid prototyping – with commercial intent – is not what regulated utilities are famed for. So is Winser concerned about the industry’s ability to buy in and keep up? Yes and no. Winser readily recognises the strides that have been made by the networks to bring forward novel responses to developing challenges – interacting with local and high-tech solutions in a way that he says would not have been common ten years ago.

At the same time, however, he sees a “case-by-case approach” in the sector to approving innovation projects and endorsing their outcomes as cumbersome. It remains a barrier, he believes, to achieving a more ­general framework for innovation that reduces time to market and is accessible to a wider range of players.

Winser links both the progress and the barriers to the introduction of RIIO. The regulatory regime he helped to shape put innovation front and centre of network settlement negotiations, and made funds available to incentivise focus on smart technology and ways of working. But “it is still based on the premise of asking the network operators to come forward with ideas”, ­Winser observes. “With so many players [in a decentralised energy scenario], I think there is an argument which isn’t only about the utilities coming forward with good ideas, but is about creating an overall framework in which the industry together can see reward for bringing forward innovation – wherever it has come from, whether that be a university or an SME [small and medium sized enterprise] or a new player ­coming into the market or a telecoms provider coming in.”

If such a framework could be developed, it would reduce the timescales for bringing innovation forward, make the industry more flexible and open the door much wider to new players.

“It would bring those disruptive technologies and business models to bear that could create the blend between pan-European integration of our energy systems, the national systems, local and home – all of those four things being able to work seamlessly together, not just in electricity, but across electricity, combustible gases, heat…” Winser pauses for breath, apparently newly boggled by the enormity of this vision, although it must be bread and butter to him now.

Shaking his head he returns to consideration of RIIO and the challenge of creating a yet more friendly environment for innovation in the UK energy sector. “RIIO was a massive step forward for encouragement of innovation. And it massively moved forward regulation of utilities. But I am sure there will be good debate about what will be fit for purpose as you see the emerging picture of all these different dimensions of change, right across the energy system.”

But what about the need for regulatory stability, a favourite mantra in the energy community? “Change is just part of the evolutionary process,” says Winser thoughtfully. “We all need to be ready to see the model evolve in a sensible way to reflect the changing views of the transformation of the energy system.”

Will the Catapult play an active part in nurturing this evolution? Absolutely. “We would not be doing our job if we did not put forward a strong view about the best way to bring forward all this new technology that we need,” says Winser. And it seems likely this “strong view” will include urging Ofgem to act swiftly on the outcomes of its consultation on regulation for non-traditional business models, due to be revealed at the end of this year, since Winser opines that “there is a need to think positively about reforming business models and market structures. We are going to need those kinds of reforms if we are going to have all these [distributed] technologies come through, because they will require very many different players to work together with broad-based incentives. They don’t lend themselves very well to case-by-case intervention.”

More specifically, says Winser, referencing his participation in a recent debate at Utility Week Congress in Birmingham (see page 27), reform of market structures needs to look afresh at the way in which network revenues from new balancing and network management services are treated. “One of your speakers explained how there is no normal market premium return for being innovative in regulated utilities. If you put up the speculative cash and it turns out you’re right, you still get the same return. If you put up the cash and you’re wrong, you eat the downside – there’s no upside.”

Winser allows that “this is difficult stuff” and that he doesn’t hold the answers to the conundrum faced by the regulator in creating the ideal framework for innovation. But while it is working it out, he says firmly, and with only a hint of PR-conscious mischief, the best thing that could happen to create momentum in energy sector innovation and promote its application is the creation of the Energy Systems Catapult.