Charlie Spencer is the Founder and Executive Chairman of Spencer Group, one of the UK's largest privately owned engineering businesses.
In this 'Future Works' interview from March 2015, Charlie lays out the on-going development of 'Energy Works', an innovative renewable-energy power plant on the east bank of the River Hull. He also discusses the contemporary challenges faced by both energy companies and consumers, and what needs to be changed in order to overcome the current energy crisis.
Interview Transcript - Key
I: = Interviewer
C: = Charlie Spencer
[time e.g. 5:22] = inaudible word at this time
[IA 5:22] = inaudible section at this time
[word] = best guess at word
… = interruption in sentence, trailing off or short pause
C: I’m Charlie Spencer; I’m the Executive Chairman of the Spencer Group. We’re now sat in the penthouse of our head office in our HQ in Hull. We’ve been working in the energy sector for about the last ten years and I guess the most important job project we have on at the moment is a project called Energy Works which is a project to develop a power plant to turn waste into energy. Now Energy Works as a name I took from actually Electric Works in Sheffield, we were wondering about a name for about three months and I saw Electric Works and I thought what a great name that is, ‘Energy Works’ yeah, that sounds great, and so we’ve got a green energy and a blue works, blue is the spencer colour and green represents a green power plant.
Now, we’re not a power plant developer, we’ve never developed anything in our lives but we had a bit of a Carlsberg moment. We were working on various biomass schemes for companies and we’ve developed a lot of different skills in-house: mechanical engineering, electrical engineering, and a few years earlier we were missing a power engineer so we actually went out to recruit a power engineer to complete the 360 degree services we offer as a business. So we recruited a power engineer and about the same time we began looking at why don’t we develop a power plant ourselves, and we thought well if Carlsberg would develop a power plan it would have this and it would have that, it would be the greenest technology in Europe, it would be probably advanced classification, it would be an energy recovery plant and it would probably use the heat for possibly anaerobic digestion. So we came up with a scheme called Energy Works which basically joined up an advanced classification plant with a universal composter with anaerobic digestion in order to process all the waste in around about a 20-mile circle of Hull.
And so this plant would have the advantages of, first of all, because it’s advanced classification it would attract the highest subsidy; it would also have the advantage of charging for all its fuel, because all light waste we can charge for RDF derived feed stock. It would also have the advantage that we would be able to use the spare heat from the plant waste to aid the anaerobic digestion process, which is basically a process that turns food into bio methane but it requires heat; those tanks have to operate at about 40°c. So we thought let’s just put this thing together and see what we can come up with. And so using our senior power engineer, his contacts in the industry, research that we had various people do on our behalf, including very bright graduates we took on for this project. And so we came up with an overall project that we felt hadn’t been done before in the UK and we felt ticked all the boxes it would’ve ticked if we’d have been Carlsberg.
So what we did next was went out to speak to, first of all, Friends of the Earth and a pressure group in Hull called Holderness Against Incineration, and we laid our plans before them to see what they felt about them. And they were very enthused because they saw it was a green energy plant, not an incinerator. Friends of the Earth didn’t like anaerobic digestion because they believe food should be composted, personally I’m against that, Carlsberg would never do that because when you compost food waste what happens is it breaks down and you get methane going into the air which is a greenhouse gas and you get no benefit from it either. So composting is really only a way of avoiding landfill charges, so far better to use food waste in an anaerobic digestion process where you can extract bio methane, you can erase the bio methane and actually produce a gas that’s good enough to pump straight into the gas main or it can run vehicles on bio methane.
So apart from that niggle, and we still have that slight niggle with Friends of the Earth because in the waste hierarchy food waste is supposed to be composted, so apart from that niggle Friends of the Earth were very supportive; the opposition group to incineration were also very, very supportive. So we went out, we spoke to the planners, what land would be suitable for this power plant and they gave us an area of Hull, quite a tight area which they saw suitable for industrial processes and it was a very rundown area. Just at the same time we were very lucky in that a site came on the market which was a cocoa mills plant, they were closing it down, it was yet more jobs lost, yet another unused site in Hull’s industrial heartland. And we made an offer for this site and, after obviously looking to see how sensible it was, we purchased the site. The other advantage about this site is it’s about 200 yards away from a 132 kV substation, which is essential obviously for a power plant to have good access to a substation to export the power, further the substation had spare capacity to allow us to export.
So, we put our plans together on this site, we spoke again to the planners, spoke again to Friends of the Earth and the people against incineration, we devised a plan that could export 25 megawatts of fuel, of electricity, and whilst it required 250,000 tonnes of food waste to be brought in to service it and we got very positive responses. So from there we put together a planning permission, we had a series of consultations in this room over the course of a week; we had a day for the councillors, a day for the general public, a day for Friends of the Earth etc. a day for officers and a day for our staff so everybody could discuss the plans. And from that we got a lot of fantastic feedback about how good the plant would be and what they thought it would do for Hull having the best green energy plant in the country; we also got negative feedback in terms of what about dust, what about noise, what about rats, what about smell, what about emissions? And that was really useful because that allowed us then to go away and do further research into all these elements, such that we could actually answer all the questions properly, because it’s alright giving the answers like, ‘It won’t be very dusty’ or ‘it won’t be very smelly’ we needed to give a scientific response. So we engaged the best consultants to do this, all the specialists etc. and produced a plan and made that into our plans for development of the plant, how we’d actually address all these things.
We then went for planning permission and at the same time we looked at any areas of population that may be affected by the plan and actually targeted those people, residents and businesses. And that targeting entailed sending out information leaflets, sending out self-addressed envelopes for people to respond back with any questions, and from that we devised a marketing campaign or an information campaign dependent on what people asked us, where we got the most responses and concerns, that allowed us to actually go out with a battle bus with our information and actually meet people face-to-face. So at the same time we devised the model and developed a model for the plan and we hired an [9:37] style bus, which is operated by and environmental charity, arranged to go out in various places at various times, inform people and then went out and basically met people. And we had a lot of people come into the bus actually quite annoyed that someone was going to build a power plant in an area where previously they’d fought against an incinerator and they came out of the bus actually saying, ‘Yeah, that’s quite a good project.’ Because this project at the end of the day will produce 60 jobs, fulltime jobs, it will involve about 250 construction jobs, the plant itself will contribute about £1 million business rates. And because this is a renewable energy project those business rates should go to the local community instead of central government, and it will deal with what are the problems of food and household waste in the region, which at the moment are actually being sent to landfill.
I: So in terms of this kind of process, how has it changed your thinking about what the key issues at the moment are about energy? I know you’ve looked at energy tariffs, thinking about climate change, government policy, the way the energy market is or questions like energy security, I know that’s quite broad, but …
C: Yeah, energy security, I think 40 years ago we would never have sold off our power companies, our power companies, the majority are foreign-owned and so we have, in my view, little energy security. We have re-enforced or tried to improve our energy security by pipelines from the continent and by the huge gas storage caverns that we have but nevertheless we are skating on thin ice. We are in an energy crisis and what we cannot afford to do is send waste to landfill or export waste that’s been processed to power plants on the continent who are all charging, effectively us, a gate fee to take that fuel as well when we have got an energy crisis. We can’t afford to compost food when that could produce a gas. The recent auctions I think have been very commercially constructed for contracts for difference, what would be won in the sense that they have been pitting energy from waste against onshore wind, for instance. It isn’t a case of either or, we need both. And so to have energy from waste plants competing directly with onshore wind for tariffs I think has been a mistake. As it happens we’ve had winners out of both sectors, energy waste has been a winner and there’s also been onshore wind farms won CPFs [should this be CFDs?] in the last auction. But we need a lot more, we need to take our energy security a lot more seriously and it needs massive investment and we need real encourage on the ground to enable people to raise finance to build plants like Energy Works.
Energy Works has took us five years to raise the finance, it’s been very, very difficult and we need to secure all our feedstock prior to build. There is room for [13:30] plants that you build it and the feedstock will come; we’re exporting, I think at the moment we’re probably exporting about two million tonnes abroad and even if we build the plants that we’re building now that is still, will still be maintained into the future. So we need to do higher investment in using the assets that we have in this country before looking to develop say nuclear plants.
Personally I think energy is too cheap, I think because it’s a cheap commodity rarely do people bother about turning off lights or putting in LED bulbs. I think unfortunately as well the people that use the most energy are people that are charged the least for that energy. For instance, I live in a five-bedroom house, I pay about 11p a kilowatt for my electricity that I use, 11p a kilowatt hour, possibly 12p; I know there’s people living in one-bedroom flats paying 20 pence because they don’t use a lot and that is wrong to me, I think we should reverse that. I think the more energy a household uses the more it should actually pay in terms of per kilowatt hour and that would make people really think about their energy usage. If I’m somebody living in a £100 million flat in Knightsbridge with a swimming pool and everything else, I should be paying 12 pence a kilowatt hour or 11 pence for that, probably half of my electricity I should be paying something like £1 or something like that.
So yeah, I think it’s too cheap and I think we also need a national infrastructure that allows us to control our energy use, and this is coming with smart devices, these smart meters, but also with connected devices, connected fridges, air-conditioning systems. So it’s the internet of things in the future I would expect would allow us to level off our electricity usage by [16:53 flapping] off and turning down air-conditioning, turning off freezers, turning off fridges momentarily when we’re facing peaks. So there’s a lot of work to do there.
I: And will it be different and if so how?
C: Well, I think there’s lots of business opportunities in the energy sector, for instance, as a middleman between a provide and a user, me and this building probably use about £20,000 worth of energy a year, probably, although we think we’re efficient. In this particular building we’ve got solar panels on the roof, all our sockets are on timers, apart from the servers, and those sockets go off, are only alive between seven in the morning and seven at night so there’s no residual power usage, people leaving things on. But nevertheless people will be able to do more. And also there’s a grey market of providers, middlemen providers coming to people like me, saying, ‘You’re currently paying £20,000 a year, we’ll act as your middleman and you’ll only pay £18,000 a year.’ And what they would do is go round the entire building replacing all the light bulbs, looking at insulation, looking at usage, looking at education to get that usage down so they can make a profit. So that’s a sector we should look at in the future.
The green deal was a sector that we looked at, we operated in solar as well, but those sectors, for me as a business, have been destroyed by variances in government policy. We did operate in the solar sector. Now unfortunately we were operating on feed-in tariffs which we were told would be in place for a certain period of time and because the take-in was so high the government actually change their mind and tariffs, which were supposed to be in place until April, actually were reduced in December. And that had a massive effect on businesses operating in that sector, including ourselves. What it meant for us was a lack of trust going forward in what we were being told, when we’re making a big investment, in our case we spent, well, purchased £1 million worth of solar panels, to suddenly have government policy change overnight would mean that we wouldn’t make those sort of investments in the future. So we came out of the solar sector. Likewise we saw the green deal as being a very attractive sector to be in and it should be an attractive sector to be in. It makes perfect sense to make finance available for people to insulate their homes and make their homes more energy efficient, and businesses, and have that loan repaid by the savings in energy consumption so people living in offices have better quality environments at no cost. So it made perfect sense. But it was, to me, not handled at all well by The Department of Energy and Climate Change, in that it was badly managed, badly briefed, people that were assessing homes didn’t have the right qualifications, the formulae didn’t work because in order to go ahead with the improvements on a house everybody had to be very certain that the savings would be real and would pay for the cost of installation. And problems with the way these calculations were made on lack of auditing of those calculations have actually undermined the public’s confidence in this particular proposal. And certainly businesses like ours, once we were very close to the decision making at the time in how this was being rolled and we were certainly put off entering this market because of that. That isn’t to say that market will… there is a market there but not a market for us until we see clear policy that’s going to support that market over a long period of time.
Considering the next few decades of climate change and the energy sector, I am an optimist, there will be work created that will give our company business and keep our people employed because there is a lot of work to do. I believe in a sustainable environment and sustainable economy. I don’t necessarily believe in climate change, I’m not convinced. What I am convinced are the need for us to live sustainable lives and that leading a sustainable life and running a sustainable economy leads to low Co2 in any event because fossil fuels are not sustainable. Why am I a climate change sceptic? I guess the weather forecasters have trouble forecasting the weather next week or next month, let alone the climate in five years’ time or 20 years’ time, and in my view the long term evidence isn’t there as yet. There is many ways of measuring the temperature of the climate and measuring climate change and the macro way of measuring is by satellite and those satellite measurements, as far as I’m aware, do not support any rapid increase in temperature. Although it is accepted Co2 levels are increasing in the environment, I’m not sure that’s entirely due to man, I’m not convinced that’s all on climate change.
When I say I’m an optimist about the energy sector, I’m an optimist that there needs to be a lot more work done to secure our energy supplies. So from my businesses point of view it’s a sector I want to be in. Can we fix this? Of course we can, we’ve been to the moon, we’re probably exploring moons around Saturn at the moment or somewhere, so yeah, we can certainly sort our energy requirements out. The offshore wind factory that is going to be built behind me, that’s a major step forward; I’m a massive believer in offshore wind. I know as we develop offshore wind and these facilities the prices of developing that will get less and less. And we’ve got to remember everybody looks at the cost of energy from say offshore wind, but that’s quite a short time period that the subsidy applies, it applies over 15 years in the case of contracts for difference. And those offshore wind turbines, I don’t think they’ll stop turning in 15 years’ time, they’re going to continue, those structures are going to be out there a hundred years. And we are living off one of the windiest places in the world in that sector of the North Sea and it’s the perfect environment for offshore wind, you’ve got 80-100ft of water over all that continental shelf, you’ve got a nice soft bottom to put piles or structures in and it’s relatively a mild environment. Northern Scotland I don’t think is economic at the moment, you’ve got ferocious seas, you’ve got an extreme environment and you’ve got granite bottoms in a lot of cases. So we’re probably sitting in one of the most attractive places in the world for offshore wind.
And I think that particular sector can grow and grow and it will be very economic in the future, not just in 15 years, it will just get cheaper and cheaper, the technology will get better and better, we’ll probably get bigger. But I think it’s a great thing for the environment as well in terms of we’re creating an offshore marine reserve; I know they have been tagging seals swimming a grid and the grid is they’ve been visiting each turbine. So I think it’s a very environmentally sustainable form of energy so that is one way that we can secure our energy supplies. But hydrogen field cells I think in the future, not too long in the future, will have disruptive technology in battery technology and nowadays people are talking about in the not too distant future being able to jumpstart your car from your mobile phone. We’re talking about that sort of disruption and when we get that it will change the way we think about everything. Already you’ve got [26:52 note from ju- Elon Musk?] installing, offering batteries for houses so you can store energy at home from your solar or your wind turbine and that’s going to be transformational when we’ve got battery storage that can pack in as much as say petrol can because it’s going to totally transform our transport infrastructure and it will transform the way we use and store energy in the home. It will make things viable that currently are not viable, like offshore wind, again, one of the problems with wind is, as we all know, it produces energy potentially when you don’t want it. But storage devices that are cheap and can store that energy not only will make our lives easier and make our energy usage a lot more manageable, it will make offshore wind and wind energy much more economic because that energy will be worth something, where at the moment at times it’s not, at times they have to give that energy away.
So it’s all going to come together, in my mind, in the not too distant future and we’ll have a totally different energy sector, and I say not too distant, 10 or 20 years.
Yes, in this country are we making enough from waste heat storage? Because certainly in other countries in other parts of Europe they make a much greater use out of district heating schemes, and all around this country we see power plants with cooling towers. And storing heat is actually quite… it’s easy technology, it’s underground insulated reservoirs or above ground insulated reservoirs or highly insulated pipes for transmission, so there’s very little heat loss in these heat networks in district heating schemes, and yet I’m not aware of hardly any district heating schemes in this country. I think I would want to link any industrial developments that produced waste heat with district heating schemes as a matter of policy. And so I guess my question to anyone in government looking at energy or working in the energy sector is: is this something that they are actually looking at, are they linking the two?
[End of Interview]
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