Alan Bates of Guernsey Electricity talks about a strategy of low carbon generation, affordability and energy security

February 28th, 2011 by Jon Taylor

Alan Bates, Managing Director of Guernsey Electricity Ltd. (click image to expand)

Tell us about your background and what you will bring to the Guernsey Electricity company over the next few years.

My career began as an engineering officer with P&O Cruises, before coming ashore into the energy sector.  I have moved on from engineering into business management where the skills and experience gained within these different organisations allow me to successfully lead strategic initiatives.

Prior to joining Guernsey Electricity, I was Managing Director of Manx Gas in the Isle of Man and was responsible for significant change, not just for the company but for the island, as we converted 60% of the of the company’s customers from LPG to natural gas.

I feel my experience stands me in good stead to manage Guernsey Electricity through a complex regulatory environment and in a time when the island’s energy policy is becoming ever more important.

What new initiatives will we see Guernsey Electricity introducing under your guidance?

Our primary goal is to deliver a quality service to our customers at an affordable price – that is what I want the company to keep focusing on. This means doing our work efficiently and making sure that our service levels keep meeting the highest standards.

However, the energy industry is one where you have to think decades ahead. If we are to provide a good service to our customers in 10 years time, we need to be working on delivering that already.

Our future strategy is being built around the principles of low carbon generation, affordability and energy security, which the industry has dubbed the ‘energy trilemma’.

The cable link gives us access to the European grid so what does the future hold for the cable link and where is Europe’s energy policy heading?

Our connection to France allows Guernsey customers to have access to affordable low carbon and renewable energy which is very important as at the current time large scale local renewables are not commercially viable for the island.

We have plans in place to further increase our importing capacity, firstly with an additional cable between Jersey and France. This will enable us to import more low carbon energy through the Guernsey link and reduce our reliance on fossil fuel based generation on the island.

This mirrors movement within the EU towards low carbon and renewable energy which is being driven by government incentives.

We see opportunities in Guernsey for developing large scale renewables as the technology becomes more commercially viable. We are working now to put the right provisions in place to facilitate this.

Our vision of Guernsey’s future is very much as part of the European grid, importing low carbon energy and generating energy from renewable sources on and around the island.

Since the industrial revolution, Guernsey has depended on fossil fuel. The notion that this might change within 20 years is scary stuff. Guernsey’s Energy Policy stipulates an ‘all electric future’ so great news for you, but why should the oil or gas providers stay in Guernsey in the medium to long term?

Most of the modern world has become dependent on energy and it is a pre-condition of modern life and economic growth. Energy needs to be viewed as a portfolio of products. I am sure fossil fuel will continue to have a place in the near future, but, whether it is because of climate change or availability of product, the world’s reliance on fossil fuel needs to be changed.

In the long term, however, the increased use of renewable energy and low carbon from nuclear power means electricity will be the primary form of energy supply.

One thing is for sure; the transition from where we are today to where we need to be in the future needs to be strategically managed so as not to adversely affect the island residents or business activities.

Guernsey’s ‘all-electric energy future’ Energy Policy also states that the island will reduce carbon emissions by 80% come 2050. In the medium to longer term you’ll shoulder a great deal of this responsibility. A bold policy but can you provide evidence you can help the island reach this target by going all electric.

The introduction of the cable link to France has been by far the largest contribution to the island’s reduction in carbon emissions.

We are putting the optimal strategies in place to deliver further reductions, however investment in renewables and the cable link will impact on costs. As a company we are aware of the impact on rising tariffs to customers and to facilitate the 80% vision in 2050 we must ensure that we implement the carbon reduction initiatives at a pace that is affordable to the island.

In order to reduce emissions further household consumption and motor vehicles will become a factor. We currently offer practical and affordable alternatives to home heating, hot water and cooking, and provide advice on energy efficiency.

However the next big step forward will be when electric transport becomes affordable.

On the island the use of fossil fuels for transport is the second largest greenhouse gas emission after power generation.

I can see a time in the near future when there is very little on island generation using fossil fuels. This would mean transport becomes the largest producer of greenhouse gases. This needs to become a fundamental concern for the islands energy policy.

Many within the energy sector see the Office of Utility Regulation as an unnecessary evil? How do you see the role of the OUR evolving following the States’ review?

As a trading entity owned by the States, Guernsey Electricity has to expect scrutiny in relation to its activities. However, the key is that this needs to be proportionate to the risk and flexible enough to allow us to put in place the appropriate infrastructure to keep the lights on today and tomorrow.

Recent years have not been as constructive as they could have been, however Guernsey Electricity is fully focused on what it needs to deliver in terms of maintaining the balance between the security of energy supply, affordability and reducing emissions.

In November you announced further cost increases. I appreciate Guernsey has been getting cheaper electric than most but perhaps the communication of how much it actually costs could have been better. Therefore, break down what these increases are. Cost of supply, salaries, etc?

In October we announced our intentions for capital expenditure: primarily on new on island diesel generation and a further cable link to France. We clearly stated that this is significant investment and that we would have to raise the capital needed to make these essential investments in the island’s infrastructure.

In order to balance this increased level of cost to the business we anticipated that prices would go up but that under the current price control model the responsibility for setting tariffs fell to the OUR, who have subsequently proposed allowing us to raise our prices by 6.3% in April 2011.

In addition to the capital required for investment the company also needs to ensure that we cover the volatility in the wholesale markets. Brent crude has recently peaked to over $100/barrel, which will have a knock effect for wholesale energy prices.

Whilst we cannot influence these costs or market drivers we can mitigate against the full effect by wholesale hedging which we do when beneficial and affordable. We are also committed to making sure that where we do have control over costs we put in place robust and pragmatic management controls to ensure we deliver a value for money service.

Guernsey Electricity first began investigating renewable sources of energy for the island in 1996. At that stage a whole range of options were considered including: wind, solar power, tidal barrages and other emerging technologies. Fifteen years on and it’s still just a publicity statement on your website. Where’s the evidence Guernsey Electricity are finding alternatives to fossil and nuclear fuel? Are we due another fifteen years of green washing?

Renewable sources fall into two categories. Micro renewables, such as solar panels, heat pumps and small wind generators are already available and used on the island. Unfortunately, these can be cost prohibitive and this has affected the take up. I believe the use of these types of technology will need to be incentivised by the States in order to really succeed on the island.

Alan Bates, Managing Director of Guernsey Electricity Ltd. speaks about micro-renewables at a seminar organised by e-si (click image to expand – ©RLLord)

The technology development for larger commercial schemes, or ‘macro renewables’, has followed a longer lifecycle than originally expected. Wind power, under the right sort of incentive scheme, is now becoming prevalent but tidal power is still firmly in the pre-commercial market development stage.

Research and development work has shown clearly that tidal power is the best option for Guernsey, and to that end, we have continued to follow technology developments closely so that when the time is right we will be in the best position.

However, to do anything radically different before the right technology is commercially available would almost certainly put significant pressure on tariffs.

Following a Scout group trip around your premises, my eleven year old has been enthusing about how fantastic The Guernsey Electricity Company is. While he was enjoying your hospitality, I was walking the dog around Bordeaux, as I do frequently. What you can’t fail to notice overhead are the plumes of smoke emanating from your power station. Guernsey Electricity’s most recent annual report and accounts, show carbon emissions vary greatly depending on the need to generate electricity on-island.

Guernsey Electricity is governed by the States’ Energy Policy, which instructs it to produce electricity in the cheapest way possible. That can prevent it importing through the cable link to France despite it being greener than on-island production. Who is ultimately responsible for this situation? (the consumer for demanding lower prices, the OUR for setting the price or the States for producing an unsustainable energy policy?).

Our vision for the future is for less on-island fossil fuel generation. This can be achieved in the short term to some extent by utilizing the cable link more. However to truly reduce our reliance on carbon intensive forms of energy we need further import infrastructure combined with local renewable generation.

At the current time we must supply the cheapest electricity possible but we believe that there is increasing support for prioritizing environmental concerns over cost. Importing cleaner, greener energy through the cable link would be our preference, and given the freedom to maintain our tariffs with more flexibility we believe we could deliver this with minimal impact to consumers.

I also believe that the island needs to tackle all the other greenhouse emission sources such as transport, commercial, industrial and domestic combustion.

In essence I firmly believe electricity is the right energy solution for Guernsey and that Guernsey Electricity will in the future achieve our carbon reduction targets, deliver affordable energy and look after our beautiful island.

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This article was published in the February/ March 2011 issue of Contact, which is the Guernsey Chamber of Commerce‘s bi-monthly magazine.

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