Utility Week

8 | 1ST - 7TH NOVEMBER 2019 | UTILITY WEEK Interview at the track record of nuclear over the past 30 years, you won't find much evidence to back that up." The Nuclear Industry Association (NIA) has said the NIC's one-new-station view is outdated in light of the 2050 net zero target. Had he read the NIA's recent statement to that effect? "I haven't, but it doesn't sur- prise me that they would argue that. "Ideally, you should deliver energy as cleanly, cheaply, and efficiently as possible. What we actually said was that the government needs to identify, by 2025 what the alternatives might be, and in that period don't order more than one new nuclear plant. At the end of that period, you should have a better view on the storage technology going forward. "We're just saying, don't put all the eggs in the nuclear basket. There's no need to yet. Renewables policy in the long run could be more effective, but we've not really had a response from government on that." Heated debate The decarbonisation of heat, which represents 20 per cent of carbon emissions, is certainly a pressing priority, he says, if we have any chance of meeting the 2050 tar- get: "We're still moving too slowly – we need to decide what we're going to do by the mid-2020s." He adds: "What I would like to hear from government is that they support industry in at least addressing what we're going to do about heat, and also giving more finan- cial support to industry to look at hydrogen and carbon capture and storage, and heat pumps, to work out what to do on that front." And where is that ingredient on the steak pie scale, one wonders? "I'm not that optimistic. I'm fearful of them not having the courage to actually make some deci- sions, for fear of getting it wrong. But in these situations, you really need more of an industry-based risk approach. Industry, being entrepreneurs, are very good at saying: 'I'm going to take some risk here, in the interest of really cracking something,' and we need a bit more of that from the government. Better that than running around being cautious, terrified of making the wrong decision for fear of being criticised by a select committee in three years' time." We talk briefly about the other big controversial infra- structure projects du jour – HS2, for example, where a trifle bizarrely, the NIC has "no view". Its input has been excused because the project had gone live before the NIC was set up in 2015 by then chancellor George Osborne. Though Sir John would appear to back HS2, he manages to answer without being entirely explicit. His views on the net zero carbon target are rather more direct and sit in line with the government and the CCC: "I don't believe you could speed it up, which is where I part company with Extinction Rebellion. I can agree with what they're trying to say, and what they'd like, but the idea that you could do it in the next ten years is unrealistic." Regulating the regulators Coming up with a set of recommendations that ensure the economic regulators have a formal remit to balance climate change considerations with cost was at the heart of the NIC's review Strategic Investment and Public Con- fidence published two weeks ago. "It's been pretty well received by everyone, although the government hasn't responded to it yet. If you were to say: 'Which is the group in all of this required to take action?' it's more the government than the regulator or the water companies. Because what we've asked is that government be more specific about the challenges, and the direction it asks the regulator to take forward in making determina- tions on what the utility companies should be doing." How decarbonisation should be paid for is inevita- bly a thorny political issue – should it be through con- sumer bills or taxation? "That's no different from the argument that the government has been pursuing over the past 20 years on who pays for rail. Do I pay because I'm consuming something, or do we all pay, and those of us who aren't consuming are still contributing to that wider cost? "It's going to have to be a balance between the two. And that's why I don't pretend for a minute that the chal- lenge for the regulators is an easy one. They are the ones who have got to cut the Gordian knots in all of this." Ditto with water, he says. "The interesting thing when discussing water with the public is that they will say: 'If we're really honest, our water bills are not that high, and if we've got to pay a bit more in order to avoid the risk of drought, then probably we should be prepared to.' "Of course, somebody who is trying to scrape by on £15,000 a year would not say that. So, the challenge always for the regulators is how do they deal with the costs for people who are at a disadvantage." Sir John has little sympathy with water companies stamping their feet over the tougher line being taken by Ofwat in its PR19 determinations. "They would say that, wouldn't they? This is a negotiation a¢er all, and none of us likes being given bigger and bigger efficiency targets to achieve. Sir John agrees that some water companies have lost the public's trust. To win it back requires "demonstrating that more of their returns are going back into investment, rather than them going back as dividends, and then bor- rowing to pay for the investment. "Their argument would be that borrowing is so cheap at the moment that now is the time to borrow, but if you completely lose public confidence and trust, you make it very easy for a government, particularly a le¢-wing gov- ernment, to come along and renationalise." With a public service ethos running through his six foot four inch frame, and as the author of Labour's infra- structure review in 2013, might he have sympathy with taking companies back into public ownership? "I can understand why people feel that way. What we've said in our report on regulation is that if you nationalise utilities, you're still faced with the same problems. Are you likely to get more efficiency and inno- vation out of a public body than a private sector body? I don't believe you are. "I think the biggest challenge that all people involved in utilities and provision of engineering services face is helping the public to understand what it is, the chal- lenge of providing it, what happens if you don't keep improving it, and that therefore there is a cost. Before he slips across the road to meet his political masters, he looks around at the venerable ICE build- ing and encapsulates much of our discussion when he muses: "The definition of this place is harnessing the resources of nature for the benefit of mankind. That's what it's all about." To see how far this government, or the next, will har- ness those resources, we must still just wait and see. "If you lose public confidence and trust, you make it very easy for a government to come along and renationalise."

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