Interview: David Clarke, Chief Executive, ETI

“It makes sense to establish offshore wind as a hedge in case the UK doesn’t deliver success on other technologies.”

Choosing the teeth of an economic crisis as the starting point for a venture seeking to galvanise investment might seem like a questionable call. But the need for new, secure and low-carbon energy infrastructure was far from going away in 2007 when industry and government partnership the Energy Technologies Institute (ETI) was launched. And the institute’s remit to evaluate and demonstrate the commercial mettle of renewable technologies remains valid.

Now as the UK emerges from recession, the ETI’s emphasis, according to chief executive David Clarke, is on security and cost. “We try to invest in the right thing at the right time,” he says.

So what are the right things at this time? Clarke picks out carbon capture and storage (CCS), biomass and nuclear as the chief cost-reining technologies. But a glance at ETI’s investments in its nine areas of interest (see box, p10) show CCS and offshore wind projects taking the lion’s share of investment at about £50 million each, while the biomass programme has only £5 million and there is little or no nuclear investment. Is biomass really the poor relation?

“Establishing biomass use is a long, slow burn,” Clarke explains (and lays immediate claim to the pun). For nuclear, he says the ETI is advocating a wide-scale new-build programme based on large and small-scale plant that could be more than double the upper limit of government expectations.

Clarke says the ETI has “wrestled with the long-term potential for UK-sourced, sustainable biomass”. He says ETI-backed work by a consortium of leading academics and industry groups on short rotation coppice and heavy forestry has revealed “real opportunities.

“How that plays out into the power industry – across logistics issues, transport, processes and optimum sites – will start to emerge from this work.”

At the time of writing the ETI has unveiled a competition for commercial demonstration-stage investments in waste gasification technology for power production using domestic and commercial refuse. Clarke describes the 5-20MW waste-to-power plants as “much cleaner than anything before”. Three companies have completed an ETI project to prove their designs and one will be chosen this summer to continue with ETI funding to commercial operation.

“Biomass,’ Clarke emphasises, “is not the poor ­relation.”

Meanwhile, new-build nuclear power has returned to UK politicians’ menu. In 2007 Clarke says new nuclear “just wasn’t going to happen”. He now sees the government 16GW ambition as possibly under strength. “Our modelling suggests the UK benefits from going bigger than that – as much as 40GW,” Clarke says. Citing the struggle faced by the developers of the planned Hinkley Point C nuclear plant in establishing funding, Clarke says the challenge will be how to implement ETI’s grander programme with “limited supply chain capacity and, critically, limited capital”.

Availability of sites is also a possible major constraint on nuclear new-build, and one that could bring a nuclear programme into conflict with CCS development, Clarke warns. “This year we kicked off a piece of work to look at the siting options and constraints not just for nuclear but also for new, big thermal power stations enabled for CCS as well.”

The conflict arises from the huge demand for coolant water that is characteristic of both nuclear power and CCS. Coastal sites are preferable for both technologies because of the access to high volumes of water and, for CCS, proximity to carbon dioxide storage sites offshore.

The ETI’s work on CCS has been extensive, with a strong focus on the storage segment, which is widely perceived as the greatest area of risk. And, along with carbon dioxide transportation, storage holds opportunities for major cost reductions. The ETI has identified around 600 potential storage sites off the east and west coasts of Britain.

Clarke says the ETI will, later this year, report on work on alternatives to big nuclear like the European Pressurised Water reactor destined for Hinkley Point. The ETI is looking into small, low-cost modular reactors – which, Clarke says, could have greater economic value to the UK and a lower cost capital.

The three “lowest cost levers” – CCS, nuclear and biomass – are, Clarke says, among six “big ticket items” that will serve up “the lowest cost energy system to 2050 that is sustainable and secure”. They are:

•    greater energy efficiency to reduced demand;

•    CCS to exploit low-cost fossil fuels;

•    new-build nuclear taken to the maximum affordable extent;

•    biomass – particularly with CCS to extract carbon from the environment through “negative emissions”;

•    gas in all its forms to go into heating and CCS;

•    offshore renewables.

“It makes sense to establish offshore wind as a hedge in case the UK doesn’t deliver success on other technologies,” he says.

Taking a still broader view, among Clarke’s defining tasks for the ETI is “proving new business concepts”. Where does he see that happening?

“We have worked with the financial community – major insurers and banks – to find what would incentivise them to put funding into a CCS project,” Clarke says. This work was conducted in partnership with climate change investment management firm, the Ecofin Research Foundation, “someone very credible with the financial community.” He says this partnership has given the ETI “traction with the industrial and financial communities”, that goes beyond demonstration projects. “It’s been a long process but we have brought the engineering and technology piece together with the finance piece,” he says.

 ETI’s closer linkage with the financial players has been reflected in a change in the make-up of the organisation’s people.

“When we started ETI it was predominantly an engineering and technology organisation. If you went now into our strategy team looking at future UK energy systems planning, 20 per cent are economists,” he says.

Clarke emphasises that an important element of the ETI’s strategy is to focus its efforts not on the technologies and other measures that are already established in the market. Its support is aimed at technologies that meet the low-carbon, secure and sustainable criteria but which need to be better proven as sound commercial prospects. “If there is a very clear market, we wouldn’t get involved. The market would invest because they can see the return,” says Clarke.

“The challenge has, over the past six or seven years, been in part the economic crisis but also the industry’s reticence to invest unless it can see a short-term return,” Clarke adds. He goes on: “Privatisation slashed research and development and the industry was sweating its assets. In terms of big technology leaps, there were no plans for new assets.

“Then we had an economic crisis, which meant there were still no plans for new assets because nobody could afford any.

“Now we see a programme to rebuild the energy system with a recognition that it will cost hundreds of billions of pounds to cover everything.”

As well as changes to address the growing importance of cultivating a relationship with the investment community, the ETI has also embraced consumers’ mores. “The most challenging has been in heat delivery,” he says.

Aside from investigating smart heat technologies, the ETI has embarked on studies into customer behaviour. “This has been an emerging journey because we started on the technology side then realised we needed to look much more at business models and consumers.”

The work will include studies of “why people leave windows open then turn up the central heating – that sort of thing”. The business model work might include looking at how heat is paid for: “Do we pay for fuel like now or maybe we pay for comfort?”

The bulk of the £80 million ETI smart heat programme will end up being spent on engineering and technology but “the entire programme will be based on the consumer view of requirements”, Clarke says.

Clarke has been at the helm of the ETI for almost its entire existence. He has steered it through much change – internal and external – including: changes in its technology focus to include nuclear; change in economic circumstances as the recession recedes; and a shift away from a pure technology focus to encompass what motivates the banks and the consumer.

Its funding has until 2017 to run. By that time the UK will be operating its capacity mechanism. Possibly it will be closer to having a shale gas industry. Maybe tidal and wave power will be looking for refinements akin to the way offshore wind is doing so now. And beyond 2017 a lot of the ETI’s investments are expected to be generating revenue. It seems reasonable, then, to assume that there will be an abundant array of engineering, economics and consumer-related opportunities for the ETI.

Clarke, however, is noncommittal about the future of the ETI beyond 2017. “We’ll see,” he says. “In five years’ time will we still be operating? I don’t know. We have had a successful independent review and this year we are looking beyond 2017 and are in discussions about future investment with government and industry.”

He is looking down a road that includes still more change. For starters there is a general election, shale gas possibilities and Scottish independence, all of which could have an impact on the prospects for renewables. But one thing at least will endure, says Clarke: “There will still be a need in the UK for what the ETI does.”