IT IS a pivotal week for the UK’s energy industry. Tomorrow Alistair Darling is expected to reveal the Government’s strategy for tackling energy supply and climate change — topics that are becoming the biggest challenges of the decade.
Vincent de Rivaz, the chief executive of EDF Energy, one of the UK’s biggest energy suppliers, does not shirk big challenges. The life-long EDF man is a natural philosopher who likes to talk about the big questions in life. He recently gave a speech in which he discussed the Enlightenment in the same breath as his own duty to keep the lights on. He’s quite French that way.
But M de Rivaz’s arguments are more than merely philosophical. He and his colleagues in companies such as Centrica, RWE and E.ON will be responsible for providing the energy sources on which the British economy depends.
“I think the big difference is that some of the challenges have become more explicit than they were three years ago,” M de Rivaz says. “There are three objectives this time — security of supply, dealing with climate change and affordability. It is making more explicit what was implicit in the past.”
The last energy White Paper three years ago gave no clear signal that a new generation of nuclear power would be welcomed and, in many people’s view, placed too much store on the role that renewable generation could play.
Almost as soon as the paper was produced, the environment for energy prices began to change. North Sea oil and gas reserves were falling faster than anyone had guessed and restrictions on supplies of gas coming from the Continent led to soaring wholesale prices, up 50 per cent in the past year. With annual household bills passing the £1,000 mark, customers were also realising that the days of cheap energy were over.
M de Rivaz has been pleased with the Government’s quick reaction to these changes. “There is a role for government, which is to define what our objectives are for security of supply. That cannot be an objective from the market. The same with climate change,” he says.
Energy industry insiders talk about the framework, by which they mean the signals and mechanisms through which the market is run, which determine the profitability or unsuitability of a particular type of generation. But the big debate of this energy review can be reduced to one question. New nuclear: will they or won’t they back it? All the signals from Downing Street are that Tony Blair and Alistair Darling, his new Trade and Industry Secretary, believe that Britain has to have a new generation of nuclear power stations to replace those that will be retired in the next ten to 15 years.
EDF Group, EDF Energy’s parent company, is one of the world’s biggest operators of nuclear power and M de Rivaz has been unashamedly pressing the case for nuclear to play a part in a low-carbon environment. What is now required, he says, is public acceptance of such a decision, through a full and open consultation. Nuclear also needs long-term confidence in the political frameworks which attach a price to carbon, and therefore make low-carbon generation, such as nuclear, more affordable. If all these things are in place, will EDF build nuclear power stations in Britain? “We have been pleased with the quality of dialogue we have had,” he says. “Nuclear does not require any form of subsidy. We are investors in waiting but we are not waiting for subsidy.”
It seems there is another list of factors that need to be taken into account: pre-licensing of technologies is desirable so that a generator does not need to reinvent the wheel each time it wants to build a power station, and speeding up the planning system is necessary. But at the end of the day, EDF Energy has to put commercial realities first.
“The first thing for us to do is to ally our business objectives with the Government’s. We want to develop our business in a profitable way for the long term,” M de Rivaz says.
EDF has 4,000 MW of coal-fired generation and 1,000 MW of gas generation.
In about ten years it will no longer be fit for purpose and will need to be replaced with something.
Finding sites and talking to the authorities about pre-licensing will take about five years. Add to that the four-and-a-half years that EDF Group expects its newest nuclear power station on French soil to take to construct.
“All in all it could take ten years [to build in the UK], which precisely corresponds to 2017 — the year that UK energy capacity will require significant new investment,” M de Rivaz concludes.
EDF is not alone in saying that nuclear can be built by private investors without subsidy. Recent DTI papers have also come to that conclusion. But in M de Rivaz’s view it is still not a technology that will be funded purely by the City.
“Investors will have to be part of the UK market. I would not suggest nuclear being built on the merchant generator model [companies that own only power stations and sell into the electricity market, rather than providing fuel for retail customers],” he says.
“The solution is not in the City. We are not going to have a kind of dash for nuclear as we had a dash for gas,” M de Rivaz says. “The City will support the vertically integrated players because they see that nuclear is now competitive but nuclear is not about financial engineering.”
The vertically integrated energy groups he refers to are almost entirely foreign-owned now. Npower and Powergen were bought by German utility giants. EDF, of course, is French and there is persistent speculation that Centrica, the only British energy group that has ever looked like being a national champion, will be bought, possibly by Gazprom.
The UK market was the first in Europe to be liberalised, but it appears to have paid a heavy price for pioneering. Those British companies that remain have scant chance of breaking into the European market, a factor that underlines the need to achieve security of supply.
“The European market will not be built despite the strong players, but thanks to the strong players,” says the Frenchman.
Now that they are here, the three great European energy groups seem intent on staying. M de Rivaz explains that EDF Energy is very important to the French parent company, which is committed to the UK.
“The lessons of the past years are that the very local players had no future. The boundaries in energy are gradually disappearing through interconnections. The more we connect, the less the boundaries are meaningful,” he says.
Boundaries may have less meaning, but there is nothing theoretical about the energy bills that are dropping on householders’ doorsteps. ScottishPower has already put up its prices for the second time this year and British Gas has indicated it may have to do the same. Over at EDF Energy, the team was very pleased to see from recent Ofgem figures that it had gained the most from customers switching. However, M de Rivaz will make no hasty pledges on prices. “We will take the right decision to remain competitive,” he says.
What of the immediate future? For years now, UK citizens have taken it for granted that they can flick a switch and have light or warmth.
“We have to be cautious about next winter, but we also have to be responsible about what we are saying in order not to add to the caution that people have,” he says.
“My job is to keep the lights on so as not to create opportunities for speculators.”
POWER CV
Name: Vincent de Rivaz Age: 52
Home: Chelsea and Pays de Bray, northern France
Education: Lycée Vaugelas, Chambery, Ecole Nationale Supérieure d’Hydraulique et de Méchanique, Grenoble
Career: 1977: joined EDF as a hydroelectric engineer 1985-91: manager, Far East region, EDF 1991-94: managing director, EDF Hydro Power Department 1995-1998: deputy head of EDF International Division (where he was involved in the acquisition of London Electricity) 1999: deputy chief financial officer 2000: head of strategy and finance for EDF Group 2002: CEO of London Electricity Group (which became EDF Energy) 2004: Member of the executive committee for EDF Group
Family: married with three sons
Other interests: in 2006, M de Rivaz was the first foreigner to be awarded the Melchett Medal, the Institute of Energy’s most prestigious award
Hobbies: cycling and photography
THE LEADER IN TEN QUESTIONS
Q Who is or was your mentor?
A There have been many people with qualities that have helped and inspired me. It is important to experience a diversity of views and then follow your instinct, take responsibility and be who you are.
Q Which businessman or woman do you most admire?
A The right person who is in the right job at the right time! There is a variety of businesses, which require a variety of talents.
Q Do you read books on management? If so, which has influenced you the most?
A What is important is experience and what you learn about yourself. Of course, I am interested by books on management, but they are not my Bible.
Q Which is more important: what you know or who you know?
A Both. Know-how just by itself is not effective. What is also really required is: know-why; know-what; know-whom; know-when.
Q What does leadership mean to you?
A It means inspiring people and providing a vision for the future. It means fostering teamwork and creating an environment where people can do more than just their job. Leadership is not just saying “I lead, follow me”, it’s about inspiring others in order to be inspired yourself by them.
Q If you could change one thing about the business, financial and commercial environment, what would it be?
A To have a world where people are not making undeserved profits on the back of volatility, speculation and unfairness. The market economy has to be designed for mankind and not the other way around.
Q What is the most important business event, good or bad, to occur in your working life?
A The creation of EDF Energy, now one of the major energy players in the UK, from the merger of a collection of companies. Behind a common identity it has brought a sense of pride and purpose for 13,000 employees. This month, with the final step of our rebranding, we have also united all our customers in the various regions behind the same banner.
Q Does money motivate you?
A Yes, but it is not the main motivation. My main motivation is playing my part in delivering our ambitions for EDF. We want to provide the best service for customers; an excellent working environment for employees; value for shareholders; to be a safe and responsible company; and to be a point of reference for matters in our industry.
Q What gadget/piece of technology can you not do without?
A I am not a gadget addict
Q How do you relax?
A I enjoy photography. It is, for me, an opportunity to capture some of the beauty of the world we live in.
