Quentin Cole: Ben we continue to see volatility in wholesale prices and transition to net zero is going to continue to be a challenge for businesses out there and those two feel at odds with each other. What would your advice be for businesses in tackling the challenge of kind of navigating volatility and transition to net zero?
Ben Wilson: The volatility point I think is really important. It’s been quite broadly observed that firstly the energy transition is going to be lumpy. It is not going to be a straight line. We’re going to go in kind of, you know, step forward, step backward, and you can see that in the way the policy and economics are playing out in different markets. So it will be a bumpy transition. It’s also worth bearing in mind when we’ve transitioned in the past from one fuel to another, you know, from wood to coal or coal to oil or oil to gas and so on that has happened over an extended period of time. And in fact, has never fully happened. Right. All those energy sources are still with us rather than just other sources that come on top. So what we’re trying to do here for very important reasons is really quite unprecedented.
What does it mean? I think it means at a system level, people like us and other big stakeholders need to be thinking about energy markets, the systems and how they work and whether some of those short run marginal cost type markets are still fit for purpose, or whether we need to be moving to other regimes.
But I would suggest that the energy price shock has fed through to people’s wallets, both businesses and individuals, much more quickly because most people are able to fixed rates forward. But you can’t do that with energy in the same way. If you could, I think then that shock would have been dampened a bit. So I do think there’s kind of market design and systems.
Then when it comes to companies themselves, I very much agree with with Vicky making this a strategic issue is what companies need to do. If you have dependence on energy, either as a significant part of your cost base or you’re in expansion mode, you’re looking to establish new facilities, then you really need to be thinking about energy strategically and it needs to be part of your kind of overall investment decision making process.
Vicky Parker: I think it is very much dependent on companies owning where they are today as well. So net zero is obviously a journey, a lumpy and bumpy journey I think we both agree on, and it will take time to get there.
You’ve heard me talk quite a lot of time about the Rubik’s Cube. That’s the way I refer to it. The Rubik’s Cube means that you have to look at all sides of that puzzle at any one time. So as a company, I think it’s looking at the cost. So how much are you directly spending on energy? But how much is energy actually consuming throughout your entire business? What’s the carbon cost of that as well? And that’s a really important part of that. And that’s directly linked to net zero. Too often those two things are looked at separately. And it’s all of those kind of considerations have to come together.
So you’re looking at cost, carbon and supply and demand, but you’re also taking account, and I think this is what’s tricky for many countries at the moment, the world we’re in at the moment isn’t standing still. So we are at that lumpy and bumpy point. It keeps changing. And I don’t know how to change the Rubik’s Cube on a day to day basis, but we have to be able to have an environment for the companies that is also agile and can allow them to respond to how some of the markets change going forward as well.
