Net zero transition and what it means for business

Are you optimistic about our race to net zero? If so, can you explain why?

I am optimistic, and increasingly so, the people in this race are not just a committed environmental minority but now a wider base of larger corporates globally, which in turn means significant amounts of capital and industrial expertise is being applied to the problem.

We are seeing an energy transition wave gathering speed and seeing big industry move beyond fundamentals like less air travel and improving energy efficiency, to developing solutions for carbon capture, developing our use of hydrogen and ultimately looking at the development of synthetic fuels. The amount of capital and expertise being brought to bear on the carbon problem can only be a positive force. 

On the flip side, what do you think could slow our progress to net zero down?

Inevitably, every element of what is required to achieve net zero will take a lot of time. If we look at the financial markets over the past 20 years, it is fair to say that people have become accustomed to making a lot of money very quickly. In the tech space, we have companies like Google and Facebook that have grown to be massive businesses in a relatively short space of time, in part because they are virtual. When we look at the energy transition process, we do need to build substantial infrastructure and of course that takes time, which must be factored in.

Another aspect of this is that we will have to reallocate hundreds of trillions of dollars’ worth of resources from what they are currently doing to what we need them to do. We will need to move from a fossil fuels investment world to a renewables investment world, and we should not underestimate the size and scale of that challenge.

The third element of this that will take considerable time for every company to install is the regulatory framework and corporate infrastructure required. Companies will need to start to measure and report their carbon impact, which will require measurement tools and all the regulations around how that measurement will happen to be put in place. There is a huge amount of work in verification and validation that needs to be done for people to be confident that those numbers are right. We must recognize that all of this will take time, and make sure that we do not lose heart or run out of patience as we put these things in place. 

Drax under your leadership has been one of the first movers when it comes to energy transition. What advice would you give IOCs and other energy businesses who are looking to transition about adapting the culture of their organization?

I would say they need to design a strategy and develop a business model that will create value while also being aligned with net zero. So, with Drax, when I became CEO, we decided we are going to be a purpose driven company, and our purpose is to enable a zero-carbon, lower cost energy future. Once we had that purpose, we developed a strategy that allowed us to deliver on creating significant value while also fighting the battle against climate change. Then we built the culture and values within our organisation to support the purpose.

Finding a way to deliver value that is consistent with net zero ambitions will not be easy for a lot of companies, but once you have that in place it will become a huge part of the employee value proposition. People want to work for companies that are doing something to make a difference in this space, so having a strategy that aligns value with the fight against climate change will be very powerful. 

Back in 2021, it was widely reported that the UK government had asked Drax to turn some of its aging coal plants back on to help deal with energy supply issues. As the CEO of a company aligned to a net zero purpose, how do you justify this kind of conflict with employees and shareholders?

I think businesses are moving away from fossil fuels, but there are certain uses for oil, gas and coal which are still acceptable to many. However, I do think this will change as the climate crisis intensifies and businesses will get to a point when they say, ‘we won’t do that.’

To me, it is about the balance, and I think people do understand that there are situations that necessitate a balance of objectives, such as decarbonising the energy system while ensuring security of supply.

Today, our biomass and hydro operations provide enough reliable, renewable power for 5 million homes while playing a significant role in UK energy security. However, Drax has agreed to the UK government’s request to delay the planned closure of our two remaining coal-fired power generating units until March 2023 to help bolster the UK’s energy security this winter. They will not generate commercially – only if required to do so by the National Grid. Russia’s war on Ukraine means Europe is facing a security of supply crisis this winter. And so, whilst we remain committed to a coal-free future and are focused on deployment of the critical carbon dioxide removal technology bioenergy with carbon capture and storage (BECCS), we also accept that we must play our part in supporting the UK, and we’re proud to do what we can to help keep the lights on this winter, which is going to be really challenging for so many people. But we’re also planning to invest £2.5bn in deploying innovative renewable energy technologies including BECCS and pumped storage hydro, which will support security of supply, as well as decarbonisation goals, whilst creating thousands of jobs.

We all know how pivotal technology will be in the energy transition process, and you have spoken out about the importance of Carbon Capture and Storage (CCS) recently. What other technologies and initiatives do you think will have the most significant impact in helping the world to decarbonize?

I think about this as a series of waves. The first wave, which we are in now, is all about electrification. It is about electricity from offshore and onshore wind, in batteries, and the rapid growth of electric vehicles. In that wave the technologies are now clear, and the path towards large scale implementation is set.

The second wave, which we are just embarking on, is about carbon capture and hydrogen. Both blue hydrogen which is natural gas supported by carbon capture, and green hydrogen which is made through hydrolysis.

Then a third wave coming down the track will involve, I believe, synthetic fuels. We need to get away from traditional liquid fuels that originate from fossil sources, and there are no obvious replacements so I think synthetics may be the way forward. They could be produced directly from woody biomass or agricultural residues, or indeed using our biomass to generate power, capturing that carbon dioxide and then using that instead of storing it to create synthetic fuel. This wave may be five years away from starting, but I think in the thirties that will be a really exciting place to be.