The regions and their utilities will play a major role in the UK’s journey to net zero, predicts new chief executive of Siemens UK, Carl Ennis, but a robust regime of local co-operation, central government policy and long-term funding will be vital. Suzanne Heneghan reports.

Net zero may belong to the nation, but it will be delivered regionally. This is the emphatic view of the new man at the helm of Siemens UK, Carl Ennis, who also sees a starring role for the North of England in the country’s bid to become carbon neutral by 2050.

But it will take a collegiate working approach from every stakeholder and genuine stability of policy and funding if we are to get there, he adds.

We are speaking shortly before the general election, during which support for regional growth and devolution amidst this historic transition was emerging as a critical theme.

Subsequently the poll result, now characterised by the landmark shift in voter behaviour particularly in former northern Labour strongholds, has propelled the regions straight to the heart of the country’s infrastructure and investment debates.

The new government has pledged to deliver on its campaign promises to rebalance the economy and prosperity, and the regions will be watching.

Ennis, who in December succeeded a fellow champion of the regions, Juergen Maier, as Siemens UK chief executive, is a self-confessed “engineer at heart”. As such, he has a forensic view of the practicalities involved in achieving this ambitious nationwide clean energy revolution.

“I do think it is very important that we address it at regional level. Because that’s where the next big challenge lies,” he says – shortly after appearing on the opening panel at a “Northern Powerhouse” energy ­conference in Hull.

The two-day event about the Powerhouse (an ­initiative launched by former Chancellor George Osborne to forge a collective force of northern cities), brought together local authorities, government, policy leaders and industry to discuss decarbonising energy and clean growth in the North of England.

Having worked for 30 years for the global German technology and manufacturing giant – most recently as its UK & Ireland head of products and systems sales for smart infrastructure – Ennis knows only too well that he takes over at a challenging moment. But he appears undaunted, indeed positively excited at the company’s role in supporting the country’s decarbonisation journey – via its myriad portfolio of energy activity, from wind farm technology to rail electrification.

This is a fantastic time to be taking over the reins, he says, with the climate emergency and public demand driving the transition.

“We are seeing a democratisation of energy. People are starting to take an interest in where their energy – including for their heat and transport – comes from.”

Progress

That interest on the ground will be critical going forward, believes Ennis, who says that while in some areas – such as the decarbonisation of electricity generation – there has been impressive progress, this has largely come from low-hanging fruit.

“There’s still a lot more to do with renewables at a decentralised level. That’s not to underestimate the value of what we’ve achieved. But we shouldn’t convince ourselves the job is done. Because clearly it isn’t.”

In terms of energy for transport, things are moving quite rapidly from a regional perspective, he says. This includes advances in train electrification and – within the e-vehicle sphere – on e-mobility infrastructure, from domestic all the way up to utility vehicle level. Similarly, on low-emission zones, with intelligent traffic systems within cities providing clean-air solutions.

Addressing heat

Yet Ennis is concerned at seeing a heat sector that is still lagging other parts of the energy landscape – despite its potentially huge impact on the future electricity system. It is here where regional solutions will make the difference, he believes.

“Again, this shows the need to stop thinking about the system as a homogeneous top-down solution. It needs to become a much more localised, bi-directional thing.

“The really important message on all of these topics is that, yes, there are things we need to do at regional level for our new infrastructure, but also we’ve got a very large installed base in terms of heat, energy and transport.

“We need to address the decarbonisation of that installed fleet, and that installed base, as much as we do the new things that we are bringing on to our system.”

Responding at scale

This “emergency”, says Ennis, needs a concerted change in approach. No one part of the net-zero jigsaw can do it alone. “And I think therein lies one of the biggest challenges for the UK – the co-ordination of the people and the partnerships who will need to be involved to deliver what needs to be done.

“The other thing, of course, is just the extent of the job. Yes, you do need technology for these projects, and we, along with others, do have it. And the technology is well proven. The challenge for the UK and local governments is, how do you scale up?”

Siemens, he said, has been working with Local Enterprise Partnerships (LEPs) on this very issue, including on a report with Hull which it launched at the Northern Poorhouse conference.

“It was to show the activity needed if we are to hit net-zero carbon by 2050. And even we were surprised at the scale of what needs to happen.”

While there were calls at the Hull conference for achieving net zero by 2030, and Ennis admired the sentiment, he views such messages as audacious goals. Even 2050, he believes, is already looking a difficult target.

“If we don’t start acting now, at scale, there is no possibility for any of those targets. Then we will have set in stone the climate emergency. And it will be terribly difficult, and very expensive, to reverse the effects that will be taking place by that time.”

Local response

With such huge tasks ahead, can renewables projects and regional planning really keep up with delivering on net zero, even by 2050, I ask Ennis? How can industry hope to respond in time?

Brushing away any adverse conjecturing, he responds: “A lot of the tech we need has already been proven, either in the UK or overseas.

“While the heat environment and green hydrogen may be somewhat lagging, there are still plenty of things we can get on with. It is often less about the technology, and more about that will and stability.”

And a can-do mindset will be vital going forward, said the CEO, who recalled how when the offshore renewables market started 15 years ago, some thought it would never scale, that it would lack clarity and be too expensive.

“In fact, what we saw was what can happen when government sets a vision and creates that market, by priming the pump with funding to help the developers.

“A lot of the money that’s been spent in the creation of offshore renewables has been private equity. Yet government did start it. And what it did – absolutely, crucially – was to create a stability of the regime.

“People knew a programme was coming. That allowed the supply chain to organise itself, and it drove costs – to the point that even deep offshore renewable wind is half the cost of nuclear.

“That’s what happens when you get clarity of policy and stability of policy over the long term.”

Ground forces

The success of offshore renewables was made easier, admits Ennis, by there being a smaller number of players involved. It was also mainly driven centrally, by government.

A new energy system which will, and will need to be, much more decentralised, has the inherent difficulty that it will need to start working at city level.

“So, one of the questions for me is how effective are cities at creating that stability of regime? I think that is the challenge, rather than any technical one. But I do think it’s possible.

“For instance, we had a really good conversation last week with the Northern Powerhouse 11 [a grouping of the 11 northern local enterprise partnerships that works with the Northern Powerhouse minister to support the government’s vision for the concept] and they seem to be trying to work as one voice.

“And I know that Andy Burnham [Manchester mayor] is very passionate about creating that environment, where that stability can be created.”

Funding change

One of the things to come out of the climate change debate and the election campaign, adds Ennis, has been an acknowledgement from the main political parties about the huge cost of addressing climate change.

“There’s a recognition that some of the investments we need to make to transition the UK to net zero are massive by anyone’s assessment, whoever happens to be right. In order to attract commercial funding to deliver it, because that is where a lot of this will have to come from, it’s about creating a stable environment.

“So, if I invest £50 million in electric vehicle [EV] infrastructure in downtown Manchester, I know I am going to be able reap the rewards over a period because of the stability of the environment to make that happen.”

“We are a business. We have to provide a reasonable rate of return for our shareholders, and broader stakeholders. But when we see that stability, we will make that investment.

“There is not a lack of capital out there to fund this transition. What there seems to have been is a lack of alignment and certainty as to the returns we are likely to get. Nobody is looking for guaranteed returns. I think most commercial environments accept some level of risk, but the risk at the moment seems disproportionate to the returns you are likely to get. That balance needs to change.”

Seizing the opportunity

Regardless of who secured the keys to Number 10, the net zero challenge was always going to be apolitical, believes Ennis, because it is a global challenge.

“One of the comments at the Hull conference was that, given the UK is a relatively small emitter in the scheme of things, should we worry?

“My response to that is that this is a perfect opportunity for us to lead, to show our capability and to sell that capability to the world.

“One of the best ways to grow our economy in the UK is to export. We could become a global expert in ­delivering the transition to net zero carbon, and sell that to the world. Because I think, eventually, they will all have to get on board with it.

“Just because not everyone globally is making the right noises. I think personally that’s an opportunity for the UK to step forward.”

Regional dividends

Strategic regional investments in places such as Hull can work on several levels.

Not only does it bring clean energy solutions to areas that may have traditionally been big polluters, it offers important skills to the local workforce.

How optimistic is Ennis that more of this development will happen and that the collaboration he talks about will come through?

“As a businessman of a large organisation in the UK, it would be an issue if I wasn’t – I am by nature an optimist.

“I would say, though, that there are also some good examples that show this happening, such as all the activities in Manchester and the Northern Powerhouse Partnership. And also in the South East, with the transport system in London.

“In all my conversations with local players, whether they be an LEP or a council, they are starting to realise the next step is required and that they are party to that.

“I think the mayors, given the right powers, are the people who are best placed to act as the co-ordinators in the city regions to deliver on this.

“So I am optimistic, and it’s not blind optimism. It is on the back of seeing progress in the deployment of powers to local mayors, and I am hopeful that will continue.

“I am buoyed up by the strength of voice that the Northern Powerhouse has had on the topic. And that the NP11 are all starting to talk the same language.

“And that’s giving me hope that it is possible to ­coalesce around the mayoral role and allow co-­operation to happen to unlock investment that’s being talked about.”

Changing scene

Yet, I ask, surely such regional ­repositioning would disrupt the ­traditional energy market model, and networks in ­particular – if cities such as Manchester, for example, were to become microgrids. However, it’s a transition that Ennis views as perfectly feasible.

“We have supported tech trials in parts of Manchester, such as the Triangulum project, where we took the Oxford Road corridor and all of the assets there and operated it as a microgrid with a reduced carbon footprint. So, it is possible for those things to be scaled up at city level.”

Yet how disruptive is it for incumbents? “It’s absolutely clear that the distribution level has been installed for more than 100 years. It is a relatively dumb network. In order to be relevant in the new environment they are going to have to create an intelligence on the network that doesn’t exist yet.

“So, it’s not that we don’t need it [the network], it’s just that it is going to have to develop into an intelligent bi-directional network as opposed to a uni-directional one.”

And there will be issues for the national transmission network, he believes. “We’ve already seen a challenge to the national transmission network because of this movement away from centrally generated power. And I see more and more challenge to the transmission network.

“But I also think that it would be wrong for us to suggest that some level of central generation is not relevant – it is. Because if you just had completely separate microgrids with no interconnectivity, you’ve then created a vulnerability on the network that you really don’t want to have.”

Regulation for the regions

Under such a decentralised system, how much would regulation need to change, I ask Ennis? Do we need to think far more about its future role, and quickly? The current model is quite traditional, with a traditional price control approach. Do we need to rethink its boundaries?

“I think regulation, as with all elements of an evolving solution, has to evolve at the same time. To think we can treat the system the same way we treated it ten years ago would be wrong,” he says.

“You’re right that there is probably quite a traditional approach to how we are valuing the network, and that’s not going to be appropriate going forward. “But I do still think we need it. This is not about deregulation and unregulated networks; that would be fundamentally wrong. I do see a role for regulation, but it will evolve to suit the purpose of the new system. That’s very important.”

Decentralisation dividend

So does Siemens see a major potential opportunity to make money from a new decentralised system, I ask?

“Yes, we see the potential. We see the money there and we see need there. We’re not the only player in this space but would argue that we’re probably the one that could fill almost all elements of the heat, energy and transport space.

“And we could do that in a co-ordinated and integrated manner, which is really, really, key. We see this as a great opportunity – both for in the UK itself and for us as a global player – to take that competency and apply it around the world.”

Northern star

With the policy of regional growth now a clear political issue, has the raising of the debate pleased Ennis, I ask? “Yes, because I think – particularly on these topics – the solution is that while it may be a national framework, it will be delivered regionally.

“I think the North over the past 100 years has shown itself to be capable of leading revolutions. The last we had was the industrial revolution, now we are talking about the energy revolution.

“And I think you’d be surprised how innovative the regions can be. When given a little bit of space and support, they often come up with the answer.”

Siemens fact file

• Siemens is a major employer across the North of England with ten significant facilities in the region, employing more than 6,000 people and more than 200 apprentices.

• Activities include the manufacture of variable speed drives in Cheshire, the production of gas turbines in Newcastle, and the development of the UK’s first wind turbine blade manufacturing facility in Hull.

• The company has recently announced plans to establish a new state-of-the-art factory to manufacture and commission trains in Goole, a development that could see an investment of up to £200 million.

• It is investing in the North’s graduate and R&D capacity, recently opening two digital innovation labs at Newcastle University and Sheffield University. It also partners with Manchester University on technology research; Trafford College, the University of Salford by supporting an automation degree; and technical colleges in Sheffield, Hull and Crewe.