Interview: Keith Anderson, chief executive, Scottish Power

"Renewable energy is what we need to be out there delivering. It's not about our future, it's about our children and the next generations."

Keith Anderson doesn’t have to look very far to see the fruits of Scottish Power’s remarkable transformation. From the window of the boardroom on the top floor of the company’s Glasgow HQ, where we meet, the horizon is punctuated by wind turbines. They make up the largest onshore wind farm in the UK – Scottish Power’s Whitelee array.

Now celebrating its 10th birthday, Whitelee made renewables mainstream, says the Scottish Power chief executive. And it was a major milestone in the journey for a group transitioning from fossil fuel to 100 per cent renewables – having completed the sale of last gas generators to Drax in January 2019.

“We’ve shut down the coal, we’ve sold off the gas, and with the projects we’re building and have in planning right now, we will replace our entire generation portfolio in terms of its size and scale with renewables. That’s a massive transition,” says its proud architect.

Anderson, a qualified accountant and Scottish Power employee since 1999, became chief executive in February this year. For the past 15 years, he’s been chief executive of Scottish Power Renewables, delivering an investment programme that included the construction of Whitelee. For some of that time he was also responsible for parent company Iberdrola’s international offshore business based in Glasgow, overseeing major wind development projects in the UK, France and Germany.

Scottish Power can claim to be the UK’s largest onshore wind farm developer, producing more than 2GW of power across 40 sites – including latterly sites offshore. It has ambitious growth plans in East Anglia, where it is currently constructing the 702MW East Anglia One offshore wind farm at a cost of £2.5 billion and has already secured planning permission for the 1.2GW East Anglia Three project with two more going through planning consultations.

The company is spending £2 billion in 2019 on clean technologies, as part of its £6 billion investment from 2018 to 2022, and, says Anderson, will this year be creating 300 extra green collar jobs, 150 of which will be for recent graduates and apprentices. Also on the agenda are plans to invest in battery storage and solar power, on new sites or land around the wind farms. “It helps to balance the mix of renewable energy, and it helps to balance the system,” he says.

Going 100 per cent renewable wasn’t a Eureka moment. “It’s about a realisation of climate change and that we need to deal with this. It will provide cheaper energy and, besides, the public are demanding it.”

The interview took place after school children had been striking to get governments to do more to tackle climate change. Anderson picks up on the youth sentiment. “Youngsters are saying ‘this is our future, it’s about us, not you’ and we need to listen to them.

“I’ve got four daughters, and that’s what they want as well. That’s what we need to be out there delivering. It’s not about our future, it’s about our children and the next generations.”

The move to 100 per cent renewables has played well with customers, he asserts. When Scottish Power announced its results in February 2019, the big six supplier’s profits from its retail operations were up 187 per cent to £271.8 million for 2018, and it had held the total number of gas and electricity customers stable at just above five million. This followed a customer exodus in 2017 triggered by aggressive competition from smaller rivals. For Q1 of 2019,  retail has not fared so well, hit by the price cap and a mild winter.

“The question we always get asked is ‘can we go 100 per cent renewables for the whole of the UK today?’ The honest answer is probably no. We need more innovation coming through, and part of that is about storage, and the way we use storage in the system.

“And right now, the best technology for that is batteries. That’s the next part of the process for us.”

A recent report from EDF Energy claimed that reconfiguring Scotland’s electricity system so that it could run purely on renewable energy would require £56 billion-worth of battery capacity, making an argument perhaps against those like Anderson who point to the low cost of wind, compared with nuclear (see p8).

Anderson, for his part, claims that as well as storage it’s also about optimising how the system works.

The Iberdrola-owned group is still a vertically integrated operation, with retail, generation, and distribution networks. It is also the transmission owner for the south of Scotland. Full integration gives it a huge advantage in tackling climate change, Anderson believes.

“People often look at our sector and say: ‘Oh, you’re one of those big old-fashioned integrated utilities, there’s no future for you.’ We’ve currently got two of the big six energy companies who have basically said ‘we no longer want a retail business.’ And they’ve tried to put them up for sale. You have a number of others in the sector saying: ‘Our future is either just in customers or it’s just in infrastructure.’

“Our view is that doesn’t actually make you fit for purpose, it doesn’t make you deliver what’s needed in the future, and it doesn’t help you deal with the future market.”

Having a hand in the whole system puts Scottish Power in the driving seat to nurture innovation and ­efficiency says Anderson, from controlling the level of output from a turbine – and managing the grid in a smart way – to installing charging points at the consumer end for EVs and helping users optimise cost with time-of-use tariffs.

He says the old-fashioned model was to just built a wind farm and connect it to the grid. The system operator could then tell you to switch it off if the power wasn’t needed. That model is changing. “What we’re now seeing is the capability to move away from that model and say ‘actually, if you hand over the minute-by-minute monitoring of the wind farm and its output to the distribution system, we will manage the project on and off’.

“That means the owner of the wind farm is getting to connect to the system constantly, and is constantly getting a degree of output as opposed to being switched off the system.”

He says greater interconnection with other countries developing in the North Sea also provides a means of capturing more of the renewable energy, so generation capacity is not wasted.

“Soon you’re getting to a point where projects being built by the UK, in the UK’s part of the southern North Sea, are nearing the borders of projects being built by Germany, by Holland and Denmark. And then you can start to move towards having an integrated system and start feeding the power in all directions.”

What about onshore wind?

Anderson praises the recent offshore sector deal which he helped launch in March, setting out how government and industry can work together to grow the offshore wind sector so it can provide one-third of UK electricity by 2030. However, the lack of support for onshore wind in the contracts for difference mechanism is something of a sore point.

He says it’s essential to protect investment in existing sites, and bring new ones on stream as well. Though the market for offshore wind is much larger, onshore wind can play its part.

“We’re looking at all the options. Our preference would be for onshore to be on the same contracts for difference mechanism as offshore, and that would be the simplest and easiest way of delivering it. And we’re still in lots of conversations with the government about that.”

Another avenue it is exploring is doing deals directly with big corporates that want to make sure they are “helping to deliver a sustainable future”. Anderson says that having gained ground in the US, this market is starting to develop in the UK, and Scottish Power is in discussion with a number of companies.

He says the next big challenge is tackling climate change and transport. “Our role, and my vision, is how we start investing and developing and rolling out a grid system that is capable of allowing an exponential rise of EVs – possibly by the mid-2020s.”

Anderson says Scottish Power is looking at where to install a whole series of strategic charging locations across the country, so people can charge at home, work, or various strategic locations across the road network.

“Another great thing for consumers is that it drives down the cost of owning a vehicle, and the cost of transportation. To fill your car up with petrol is probably £70/80. To fill up with electricity is £5.”

Was being a first mover in renewables a big risk? “Taking steps like shutting down a coal plant or selling off your gas, those are huge, massively important strategic decisions. But if you keep looking at the future, your belief in the future, your belief in the need to tackle climate change, and belief in the model that you set out, then it helps you to manage and mitigate that risk.

“But absolutely, if you go faster, you do it before others, you gain the benefits. And that’s exactly the same with the start of the renewables.”

“Why were we so successful with onshore wind in the UK? Because we got involved before nearly everyone else. Why did we manage to build the largest onshore wind farm in the UK? Because we went out and found the sites before anyone else. Why is it we’re in the process of building a 700MW offshore wind farm, and why is it we’re going to build a 1.2GW offshore wind farm? Because we got involved early in the process.

“I was asked the other week if I was frightened that competitors might catch us up. And I said ‘well they can keep trying if they want.’ But we’re going faster than them right now, and we’re pushing ahead, and we’re delivering, we’re showing that we’re different, and ­customers are responding to that.”

Keith Anderson on…

… the future for nuclear

I can understand why any government wants to make sure it manages and balances the portfolio. Right now nuclear is a big chunk of that in the UK and you don’t want to lose all of that at once.

When the government announced the contract for Hinkley, we didn’t criticise the contract, although there was criticism about the cost of the contract. Our challenge then, and it remains the same challenge we would give nuclear power today, is show us how you’re going to bring the cost down.a

Because for onshore wind, we’ve brought the cost way down, down to about £40 MWh. For offshore wind, we’ve taken it from £150MWh, to the last auction which settled at £57MWh. But with nuclear, you’ve got a contract at £95MWh, show me how you can bring the cost down?

… alternative technologies

We’ll continue to keep an open mind about other technologies. The challenge for those technologies is showing how they can deliver volume on to the system, how they can do it quickly, and in a cost-competitive way.

In terms of areas like wave and tidal, wave in particular has struggled to demonstrate reliability, let alone bring down costs. For tidal, I think they’re very close to demonstrating reliability, their challenge now is showing us how they can bring down the cost.

… the price cap

The price cap is there, it’s been implemented. Our absolute view and belief is that in some way, shape or form, we need to get back to a fully functioning market. That’s going to involve several things happening around making sure we, the industry, are seen to be dealing with the issue of vulnerability, and making sure that those people who need to be protected are being looked after, in a competitive market.

It’s incumbent on us, and everyone in the sector, to come up with a way of doing that.