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‘We have virtually de-carbonised the electricity system’

Business | Published:

Chris Ambler has held the reins of Jersey Electricity for the past ten years and in that time the business model has been transformed from an on-Island generator of power, to one built around imported low-carbon energy. Gwyn-Garfield-Bennett went to meet him and hear his company's vision for the Island's future power needs

Jersey Electricity is a public limited company whose main shareholder is the States of Jersey. It is also the only provider of electricity in the Island. While some challenge that monopoly position, chief executive Chris Ambler says it’s the reason why Jersey’s electricity prices are lower than the UK and many other places in Europe, and why Jersey is way ahead of many other countries in reducing carbon usage and its subsequent damage to the environment: ‘We have now virtually de-carbonised the electricity system.

‘Those local on-Island generation systems are there for back-up. The composition of the imported power from France is two-thirds nuclear and one-third renewable hydroelectric and it is certificated so we know the source,’ he explained.

Purists would argue that nuclear is not where we want to be, that it’s to renewables where we should be focusing, but Mr Ambler is quick to say that many renewables are simply not economically viable and would push prices up: ‘Power prices in Jersey are now 15% to 20% lower than Guernsey, we’re 15% to 20% lower than the Isle of Man, we’re about 15% lower than the UK and EU average. If you look at how prices have changed, so the stability aspect, you’ll recall that we had a 2% rise from 1 June this year, that was the first rise for four years. Compare that to the UK – UK power prices on average have gone up 24% in the last 18 months.

‘That said we know that customers are wanting us to do more on renewables locally and so we can do that and are happy to do that and a couple of months ago we launched a request for expressions of interest in a ground-based solar development. The reason we’ve done that is we’ve looked across the landscape of renewable technologies and there are only some which are economically viable, a lot of them are not economically viable and require subsidy if those schemes are to be developed, and the challenge that presents is that anything that requires subsidy needs to be funded and would need to come from government funding which will ultimately lead to higher taxation.’

The three requirements for a power supply are affordability, sustainability and security – the energy trilemma. With 95% of our power now coming from off-Island, is our power supply really secure as Brexit looms and the pound falls against the Euro?

The JEC has had a relationship with RTE and EDF in France since 1984 and has recently signed an extension: ‘We have as part of that relationship a hedging and risk management framework that we have with them which allows us to buy power little and often on a forward-looking basis. We do that on both power and foreign exchange. So we have a rolling programme of hedges to manage that risk. We’ve not had an incident in 35 years, occasionally we have had a technical problem which has led to the failure of a cable.

‘We’ve also done quite a lot of work on Brexit in terms of looking at our contracts, working with the States of Jersey. We’ve also got a relationship with Energy UK which is an industry body in the UK that represents the UK power sector in its dealings with the government and other parties and the UK is also dependent on inter-connection into France and Europe and so we think the probability of there being a problem is very very low. If there is a problem we’ve got stand-by generation at La Collette and also at Queen’s Road.’

The Island’s stand-by generation can manage when demand is low, but at peak times it would not be able to cope. As we are being encouraged to ditch our gas -guzzling diesel and petrol cars and move over to clean electric vehicles, will this put yet more reliance on our electricity supply?

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‘The way electric transportation will work is that you obviously have got storage within cars and those cars will be charged overnight, a bit like your mobile phone. That is likely to be the model and we will construct tariffs to encourage customers to use power in the overnights when it’s cheaper for us to do so and we will pass those benefits on to consumers. So on the transmission side of the network there is plenty of spare capacity even if the whole of Jersey’s fleet of cars and lorries were switched across to all electric variants.’

Interestingly, if we did transfer all the Island’s cars and vans to electric, the JEC’s revenues would only go up by 10 to 15% due to the high efficiency of electric vehicles.

Despite it not being a huge money-spinner for the business, Mr Ambler would like to do more to encourage Islanders to go electric with their cars, however he has sometimes found it difficult to get support from government: ‘There is an energy plan and that is in place and there’s a very clear carbon reduction target in that, an 80% reduction by 2050, so some of these things are in place. I think the States are not always easy to deal with because you’re dealing with different ministers who might have different points of view on how a policy should be implemented and they might have different points of view of policy.

‘So electric transportation is a good example. We have taken a number of proposals to different ministers over the last five years on electric transportation and it’s not been easy to move that forward and I’m not saying that’s the reason why they’ve not taken off so much, there’s a whole bunch of reasons, but I don’t always feel that they work in a co-ordinated way and it makes it very difficult for parties like Jersey Electricity to engage with them and at the end of the day help them. I do sense that will change under the restructured government and I think that’s very positive. I think that it would be great if we could get a clearer mandate on the environment and carbon and decarbonisation.’

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With one company controlling our electricity supply that powers our homes and businesses and potentially our transport, is Mr Ambler concerned that their monopoly position could be taken away? ‘The most important thing we’ve got to do and we’ve been working on, but we’re not perfect, is to deliver more and more value to consumers to give them the very best possible package of benefits and when I say package of benefits it’s not just about price, it’s about the trilemma components, it’s about security of supply, it’s about carbon and giving them choices around how they use energy.

‘I think competition would lead to higher prices in lots of cases. Don’t forget in the UK they’ve got competition and we’re 15% cheaper than them and we’ve already de-carbonised the electricity system. If government and consumers want to see competition then we are not going to be opposed to that. Our focus is delivering the best value for money to consumers. There are checks and balances in the current system, we do have the electricity law, it has been updated, there’s potential for it to be updated again. We do have the competition law so we can’t abuse our dominant position. We also publish our accounts, we are a listed company and there is an enormous amount of focus on governance these days and disclosures. You can work out the entire economic model of our business, you can see our return model – that’s all disclosed so there’s a lot of transparency around that.

‘The government might say we know all that but we still want competition, fine, but be careful what you are trying to achieve because competition for competition’s sake might well lead to higher prices and in my view, a market of this size it probably will lead to higher prices because you are effectively duplicating networks, you are duplicating infrastructure that would have to be in place for different competitors and at the end of the day this is a network game, this is a scale game and we pass on those benefits to consumers in the form of lower prices.

‘If we had competition we would be much more reserved about making these big meaningful investments because you’d be deploying capital at risk, you’d be investing in stuff that may become redundant in five years. So what’s important is the government need to be clear on what their objective is, and there’s a groundswell of opinion, right across the world now, around the linkage between high levels of carbon and climate change.’

One of the thorny issues around renewables has been the JEC’s insistence on a stand-by charge to those who are generating renewable energy, whether that’s from solar or another source. Mr Ambler is keen to justify that charge: ‘That customer is relying on the back-up of the grid. So there’s a cost associated with providing the back-up service of standing by and being available instantaneously to step in and serve that customer seamlessly in the event that it goes dark and they can’t generate solar power or that solar system fails. It’s almost like an insurance policy. What we are saying is look we are happy to connect these facilities and we’ve done so for many years, but we feel it should be done by rights on an equitable basis.

‘In other countries, renewable developers have been enjoying the benefits of a standby service they’ve not paid for. And the problem with that is there’s a big cost associated in providing that infrastructure, having it there and available to step in instantaneously and if we can’t cover those costs from that customer, all our other customers will have to pay. So there’s an issue of equity.

‘People think you’re just trying to protect profits, actually it’s more about equity amongst our customers.’

The JEC isn’t just about power generation, it’s 80% of the business so will it diversify further? ‘We are already actually very diverse. We have the energy business, we’ve got JEBS which is a contracting business, we’ve got Energy Solutions which is an advisory business, we’ve got Jersey Energy which is an advisory business, we’ve got Powerhouse.je which is a retail business, so here today we’ve got the ability to service quite a broad range of demand from consumers.’

Pre-1984 all our electricity was produced in Jersey from mostly oil generation. In the last few years the JEC has invested £135 million in two new cables to France, as well as on-Island infrastructure with the substation at St Helier West and switching station at South Hill, not to mention the roll-out of smart meters.

If we cannot take any more carbon out of the current electricity supply, the only way that we will be able to reduce carbon in Jersey is fuel switching from oil and gas. So does Mr Ambler think the JEC is in a good position as a business?

‘I’m very pleased with where the company sits currently, I think it’s in very good shape, I think we have made some good investments, those were big investments for a company of our size, Normandy 3 was a £70-million project, our entire company is only worth £140 million – it’s half the value of our company. Guernsey picked up some of the cost, but these are big infrastructure projects so I’m pleased with where we sit as a company. I think we’ve got some great people here.

‘I’m really pleased with how the organisation internally is developing. I think there are some challenges ahead like in any business. We’ve got further challenges around decarbonisation, how do we fuel switch from gas to electric? As regards decentralisation we’re going to see much more renewable development, that’s good. How do we integrate that into our network in an eco-system that works for the community?

‘It’s really important to us that people understand how our system is different to the UK and the rest of the EU and that this hasn’t happened by accident. We are not anti-renewables and I think people might perceive that to be the case through things like the stand-by charge, for example.

‘We’d like to encourage a debate and engage with consumers and say look we can do all of this stuff but bear in mind the consequences and don’t think just because they do that in the UK we need to be doing it. Because, actually, when I talk to my professional peers in the UK and Europe, and I’m a member of a lot of networks there and I meet them regularly, they would die to have a network like we’ve got and a system and franchise that is delivering excellent outcomes to consumers in a way that they can’t get close to at the moment.

‘So when we think about these policy interventions, you know a lot of people might say I don’t see a lot of solar panels here you must be backward, you must be behind, actually we’re different. We’re not anti-solar. We can do all of this stuff but there are consequences and implications of it and I think we all need to have a sensible discussion about the trade-offs there. Some of those opportunities will lead to higher prices for consumers, others won’t and our focus is on how do we really focus on the areas where we can get the best bang for our buck, where we can socialise the benefits without socialising the costs in a regressive manner. There lies the challenge.’

Gwyn Garfield-Bennett

By Gwyn Garfield-Bennett
Business Editor

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