“Energy security and price stability are economically critical. We must build both”: Alistair Phillips-Davies, SSE 

“We are moving from having power stations near coal mines and cities, to running turbines up on windy moors and fells in remote parts of the UK and offshore. That requires a fundamental rewiring of our entire grid system,” says Alistair Phillips-Davies, CEO of Scottish and Southern Electric (SSE).

The UK's energy system is at a crucial inflection point. A rewiring of the country is underway, accelerating the shift from coal and gas to renewables to meet net zero goals. 

Powering UK economic growth 

This isn’t just about keeping the proverbial lights on — a robust energy transition is a critical driver for the UK economy, which the Government has made clear it recognises. 

From manufacturers to technology companies, UK business needs more power on every front, especially with rocketing data storage and processing demands from technologies such as artificial intelligence (AI). However, price stability is just as important as power availability. 

Phillips-Davies says: “Because we are always installing new turbines, it means we are always iterating and improving on the generating technology. We removed 70% of the cost of generation between the late 2000s and 2020, going from £140 a unit to about £40 a unit."

This reduction in the cost of renewable energy generation is critical when competing with more traditional energy sources — such as coal and gas — and contributing to price stability. 

Innovation is now focused on flexible power generation and storage technologies to provide backup on days when the wind does not blow, and the sun does not shine. This is particularly important for the technology hyperscalers — organisations providing cloud computing and data management services to the business world.

“I think for every project we’ve got running in Europe, from Ireland to Holland, Italy and Spain, all of those have at least one of the hyperscalers talking to us about contracts and getting that green energy,” says Phillip-Davies.

“We are developing a pumped storage hydro project in the north of Scotland which could provide vital flexibility and energy balancing. If we can get it built, it can power three million homes for up to 24 hours at a time by pumping water up the hill when there is excess wind and running it back down to power hydro generation when we need it.”

Investing to electrify

The SSE group consists of six business units focused on developing, constructing, operating and investing in electricity infrastructure. It has a significant role in the UK’s energy transition, investing around £20 billion between 2022 and 2027 to accelerate progress towards net zero emissions. Increasing renewable output fivefold is a key target, with a 40% stake in building the world’s biggest offshore wind farm at Dogger Bank, off the East Yorkshire coast, a major part of that plan. When complete in 2027 it will have a 3.6GW capacity capable of powering up to six million homes annually. 

Upgrading the transmission network is as crucial as switching the power generation source, if the country is to meet the substantial increase in demand anticipated over the coming years. To this end, SSEN Transmission, the 75%-owned subsidiary of SSE, has announced plans to invest at least £22 billion in grid infrastructure over a five-year period. 

“We are looking at the electrification of the economy and to heat our homes and charge our cars. The public are going to find it unforgivable if we haven’t built the assets to generate that electricity or the networks to distribute it. These are our focus areas,” says Phillips-Davies. 

There is still more friction to remove from the transition, however. Capital will flow to the places where speed to market is quickest, and the planning system as it stands introduces significant inertia. Collaboration between the public and private sectors is crucial for maintaining the progress of the energy transition. 

“We've been waiting for two years for planning consent for a particular wind farm off Scotland. If that comes it will probably bring over 4,500 jobs, add over £8bn to the UK economy and create the opportunity to bring manufacturing supply chain to the UK as more markets look to the North Sea for their energy generation. We can and should be a part of that — through our investments we’re already playing a key role in bringing a new cable manufacturing facility to Scotland because the supply chain can see the orders are coming. A yes or no answer to planning permission in 12 months is preferable to a rolling maybe that stalls progress for everyone,” says Phillips-Davies. 

Certainty creates momentum

Certainty is the tailwind of the energy transition. Yet the industry is both influenced by politics and impacts politics, making it tricky to navigate. This complexity is further compounded by the fact that UK energy generation and UK national security are intrinsically linked.

“Energy security and price stability are economically critical. We must build both. You cannot be in a big, developed economy without access to energy. We need to lock in the cheapest prices we can to make sure that we don't suffer some of the price shocks of the past.”

“It will have positive feedback to the energy industry itself too. If we're constantly going through boom-and-bust cycles, then that pushes up the cost of capital for building the infrastructure we need.” 

With his recently announced retirement from SSE on the horizon, it’s perhaps difficult to talk about legacy in a time of such enormous change, but Phillips-Davies is clear. 

“I think the key legacy is that people don't really notice that I've gone when it happens. The company's really well placed, there's really good succession and normal service was resumed quickly. This energy transition will take a while, but hopefully we've got the assets, the people, the technology and the partners. I think we've transformed SSE into something that's very relevant for the next 20 years.”