Wind & Water

0:00Wake Up To Money from BBC 5 Live. Hello, morning. Welcome to Wake Up To Money. The government has awarded contracts for new offshore wind projects capable of powering up to 12 million homes. We'll look at what all this means for the make-up of the national energy mix and what direction costs for companies and us consumers might be heading in. Also on the programme this morning, we will chat about homes and businesses across Kent and Sussex still suffering from major water outages. We'll be speaking to a business that's been affected this week. and Wikipedia turns 25 today. Once regarded of something not to be relied upon, does the current information environment, or lack thereof, perhaps shine a bit of a different light on the internet mainstay?

0:44Wake Up To Money with Will Bain. Hello, morning. Welcome to Wake Up To Money on Thursday, the 15th of January. Just gone five o 'clock in the morning. We're with you this morning. Great to have your company back on the programme. Yes, we're going to be talking through what was an interesting round of allocations for offshore wind projects. You might remember we talked about this a lot on the programme a couple of rounds back where no one bid to build these new offshore wind platforms. A record amount yesterday, but what does that mean in terms of our bills and our mix and how do we get that energy onto the grid?

1:18We will be chatting about that as we move through the programme. We'll be hearing about the kind of still ongoing problems with southeast water as well. And yes, Wikipedia at 25. famously of course decided not to make money although it does ask for donations now so we'll talk about how it's managed to survive really I suppose without turning to a fee as it moves through as well so if you'd like to get in touch with us about that or anything else you hear throughout the program this morning 85058 is the text number to join our conversation it's 08085 909693 on the whatsapp with us for the next hour as well Shanti Kellerman co-chief investment officer at Seven Investment Management back with us on the programme.

2:00Shanti, morning. Great to have you back on the programme. Thanks. Good morning. Another high for the FTSE yesterday. Is that one of these cases where once it gets the sort of records, you keep breaking records or is there something more interesting going on? Yeah, so I don't think it's anything to be worried about because, yeah, in the long run, you need to keep hitting all-time highs to get long-term returns. I think what's driven it a lot this year is There's a lot in areas like defence, which has had a good start to the year, given some of the events in Iran. You also have things like the mining sector, metals.

2:36Those have had a strong start to the year. And then also like banks have done fairly well. And so those are areas where the UK market has a lot more exposure to those indices than something like the US market, which still has those kinds of companies, but they're a much smaller percentage. Yeah. And we were talking about this earlier in the week as well. things like metals too lots of miners on the footsie 100 for example yes so you're you know your big companies like rio tinto or anglo-american but then there's also some of these smaller ones like fresnillo things that are involved in the gold market um and they've you know there's a lot of you know the gold and silver prices we've talked about on the program but also things like copper have started to do really well and that's you know it shows when there's a lot of demand for those medals it shows the economy's doing well um so i yeah it's a it's a good start to the year i don't think we should be worried about all-time highs that's interesting though isn't it because we talked lots about confidence in actually in the in the programs we had on the on before christmas and around christmas new year as well you know consumer confidence business confidence but actually things like seeing the footsie 100 at all times highs we we do sort of shrug those off sometimes actually and that that is the other side of the picture a little bit isn't it yeah sometimes things aren't as bad as we think um there is that element of the the footsie 100 is a very international index so it doesn't necessarily reflect you know exactly the the uk economy um but it does still make up a good portion of people's investments you know so if they're looking at their investments and seeing that i think it can give that that positive confidence boost and then it's also the uk is a market that you know it had some periods where it didn't perform as well now the areas that that market is supposed to are in the spotlight and it's doing better so let's yeah let's be happy let's not constantly beat it up um well let's see how the confidence is out there for the other half of our panel this morning because daniel is alongside shanti for the next era as well here on the program daniel the founding partner and managing director of the marketing agency gecko group morning again daniel great to have you back on the programme.

4:45Good morning Will, good to be back. Where is your confidence level then at the moment, perhaps personally and professionally? Well we're only two weeks into this year so I remain optimistic. It's you know it started off win one lose one, it's just the way it goes but I suppose for our perspective we've got to map out 26 and it's not going to be a race to the bottom. You know for me it's about value over volume so that's what we'll be looking at across the business. Well let's start exactly there, why don't you explain that out, win one lose one. What do you mean? Well, competitive tenders happen regularly within our industry.

5:18It's just one of those things in advertising and marketing, etc. People go out to tender and move agencies and you retain and sometimes you lose them. And we've started the year winning and losing one. People always think that, often say, sorry, that marketing, good kind of barometer for what's going on in the kind of wider economy, right? because it's often with companies the first thing, the first budget that kind of comes under pressure in tough times, for example. So what are you seeing to kick off the year? And obviously you're looking further ahead than that as well. So talk us through perhaps your first half of the year.

5:54I think what we're beginning to see is actually there will be a cut and I know that there will be some announcements in the bellwether that would be, I think, land today at some point. But, you know, what we're seeing is cuts within some of the marketing spends in particular disciplines like sales promotion. and it's probably about you know where brands can do direct to consumer so they don't need to do that marketing spend that they perhaps you you know were doing earlier but also as well it's about confidence people want to trust in a brand and again i think when you kind of continuously run promotions you do value the brand and therefore people lose confidence in your brand it is very much about looking at the consumer and where the consumer's minds up and they are cautious they are cautious and everyone is cautious when you start the year they forget you know people are going to have to wait several weeks till they get paid again and you know Christmas was probably quite expensive this year let's come to the consumers in a moment just one more on what you were saying there as well Daniel because that's interesting too so the I guess the um the tightness then what do you kind of put that down to the business kind of tightness and has that been shifted by when you're talking about that direct to consumer offer is that all I mean some of that AI as well.

7:07Yeah, absolutely. I mean, we know brands that have jettisoned a couple of agencies because they've realised that they could do things themselves internally on AI at their desktop within hours as opposed to weeks. And we're beginning to see that trend kind of trickle in now in briefs and what they want you to do and what they're prepared to do in-house. But it's also as well that element whereby the margins are so tight, not only on the products and the uncertainty about, you know, selling your products and the margin that you make on it, that the knock-on effect of agencies is that the margin is impacted on what you do.

7:39And, you know, it costs money. It costs more money every single year. And here we are, what, three, four months out from a national living wage increase, which we're all kind of gearing up for. And people are beginning to realise, actually, this year maybe won't be as stellar as perhaps they thought. And what has all that meant specifically for you guys at Gecko? As I said, it's value over volume. I think what we need to look at is really at the clients that we know will add to our bottom line to continue being a sustainable business, a business that can manage and motivate and develop the talent that we have within our group rather than constantly be looking at ways in which we can cut cost.

8:19Shanti, interesting hearing Daniel talk about marketing. The other one that we've seen in your world and kind of stock market listed companies this week has been recruiters as well, hasn't it? We've got the last of the really big ones. Robert Walters is a little bit later on this morning. but Hayes and Page Group and what they're kind of signaling about what's going on about, I know in very specific kind of sectors for those companies, but what they're signaling about what's going on with hiring, also kind of bellwether, canary, whatever you'd like to, whichever cliche you'd like to use, right?

8:50Yeah, so there's the, you know, you've seen in the press, the low hire, no fire is kind of the tagline of there aren't really massive amounts of redundancies at the same time hiring is a bit cautious. I think you'd hope a little bit of that will dissipate since we got through the budget and all that year. But then there's also the element of, you know, can we do things more efficiently with AI, you know, so therefore we don't need to hire new people. I think that's something you'll continue to see. And, you know, for a lot of businesses, staff is one of the biggest costs. So you'll naturally be very cautious about when you add more costs and really want to make sure it's delivering good value for you when you do.

9:30Daniel, what are you seeing in that kind of space? Absolutely. I mean, your staff are your most valuable asset. And to recruit talent is, you know, how you create great work for your brands. But talent costs money. And the ultimate thing, as I said earlier, is that, you know, you want to manage and motivate a team that are happy in what they do and are producing great work. And in order to do that, it costs money. So it has become, you know, you have to balance. Do I, you know, recruit five heads or do I make it three and put more money into those roles that I'm recruiting for? Yeah. And how do you get that balance right?

10:04And also, I presume, within that mix to Daniel to what you're talking about as well is investing, investing in tech and getting into that, too. Investing in tech, but also training people on how to use that technology to the best of their ability, but also as well to be able to produce the great work that we're doing out there. Everything costs money. Everything absolutely costs money. And, you know, everyone that's listening today knows that there is nothing for free. What are you seeing then? How are you sort of making that balance then? Are you going for that? A little bit like what you were saying before with the pitches you're making, quality over quantity.

10:37Is that what you're going for in terms of staffing as well? Perhaps paying people a little bit more, but making sure you get absolutely the right person, the person you really want? Yeah, I think it's that rationalisation of understanding the workload and the capability amongst the people that are being able or expected to output that amount of work within those timescales. So, you know, you really have to balance it because it does make a massive, massive difference. You know, one head and heads cost money. There are statutory regulations that you need to pay, PAYE and all that other kind of great stuff.

11:10So, you know, the costs cut deeper and deeper. and this goes back to my point about value over volume in that we want to make sure that we're a sustainable business and if we just recruit heads for the sake of recruiting to fulfil a brief and we make no money, then what is the value for us? And Shanti, just on the opposite side of the recruiting picture, if you like, as well, I can't remember if it was Hayes or Page, but one of the two of them in there, Financial Results, had this very interesting section about sort of employees' reticence to move, almost to kind of sort of better the devil, you know, right, because of, I'm guessing, again, what, economic confidence and thinking, you know what, I don't want to start a new job in this current environment.

11:54Yeah, so there's always a bit of risk when you move because, you know, for example, if you've been somewhere, you know, three years, five years, you might have all the protections around things like redundancy and stuff like that. You go somewhere new, you've got a probation period before you get any of that. You might not get all your benefits like medical or maternity leave until you've been there a certain amount of time. And you never, you know, as much as you might interview somewhere, do your research, you never really know what something's like until you're in there. I think similarly, companies kind of learned, you know, we had a really high amount of turnover during COVID.

12:26And the cost to kind of get someone up to speed is really high. You know, it's training. And so in some cases, you know, even if you might have to pay someone a bit more, it's actually cheaper to do that and keep them than go through all the costs of hiring and retraining. Are you seeing that, Daniel, the sort of importance of retaining people as well as, you know, finding good new ones to add to the team? Yeah, always. We've always are, you know, in particular myself, we've always valued the people that work and choose to work for me. I'm very honoured that they choose to work for us. So therefore I need to value what they do and how they do it.

12:59So I think there is a real importance on that. But people's propensity to move, I think, has got a little bit slower. You know, to the point that was made earlier in lockdown, it went a bit, you know, haywire. It has calmed down since then. So we are seeing people actually stay within roles for a little bit longer than perhaps they would do or would have done in the last couple of years. By how much? I think, you know, we're looking at that point where 18 to 24 months, you know, used to be that breaking point. It's probably add another year onto that. and we're seeing people stay in those roles within three years and perhaps looking for that next challenge thereafter.

13:33Really interesting. Well, what are you guys seeing out there? Whether you're job hunting, you know someone who's job hunting, whether you're recruiting for your company at the moment, 85058. Let us know what you're seeing out there. Really interested to hear what the kind of mood is right around the country or 0808599693 is the WhatsApp if you'd prefer to get in touch that way as well. Now yes sir, the government announced it's awarded new offshore wind contracts capable of powering around 12 million homes following its latest renewable energy auction. It's also known as Allocation Round 7. The government's goal to deliver a clean electricity system by 2030 and it hopes this latest round of contracts will be a big step in that direction.

14:16Anna Moosa joins us on the programme and is the Executive Director of Policy at Renewable UK. Anna, morning. Good morning. I had some very enthusiastic people on the BBC yesterday from the energy sector about all of this. Did you share that enthusiasm about this latest round? Indeed. There was a real sense of optimism following yesterday's announcement. It's really important to note that this is the biggest round that we've seen in the UK, with 8.4 gigawatts of new capacity being cleared, but also the biggest round in Europe. So a real vote of confidence in the UK market and also the capability that we have to attract new investment in this industry.

14:56That's critical for energy security and for lowering our bills. Take us back a little bit then as well, because although I've read it out in one line there, it seems often when we come to this story, fiendishly complicated how this works and the strike price within it. Just explain to people, one, how this auction works, and then two, why it's kind of important to the companies. Yeah, so the reason why the UK market is so attractive, and by the way, to date, we've had about£77 billion of investment coming into energy infrastructure, is because of this Contracts for a Difference scheme, where effectively you have an auction every year.

15:38every company competes with their projects and the lowest cost projects win a contract that guarantee their price over the course of 20 years. Now, it's really important to remember that this price doesn't cover just cost of new generation. That's often a mistake that we see being made. It's the cost of building the infrastructure as well. So what we've seen with the strike prices announced yesterday, it's really competitive prices if you compare the£91 per megawatt hour with the cost of building, let's say, a new gas turbine, which is estimated by the government currently at about£147 per megawatt hour.

16:17What's really important to note is that auction dynamics really work because every year government sets a maximum price that it's prepared to pay for these projects. And because of the level of competition that we've seen this year, with over 24 gigawatts competing, we've seen the strike prices coming down below 20 % below that cap. So really good news. There is scepticism about that, about how useful that continuation, I guess, of using that strike price is, isn't it? And not necessarily from people who are particular enemies or political enemies of the industry or the move to renewables. Dieter Helm, professor at Oxford University, been a government advisor for various governments over a long period of time about the green transition, hasn't he?

17:06Saying, in his opinion, this price, while sensible in the, you know, trying to draw people into to invest in in the initial years to get this sort of kicked off the ground is now, in his opinion, locking in higher energy prices and that people, us listening, are being locked into kind of higher bills, paying kind of legacy costs, especially as the kind of cost of building these things gets cheaper and also saying, you know, we should be more open-minded about the mix and using perhaps a bit more gas and things like that now that the prices of that are more stable than they were four or five years ago.

17:44Just take those in turn, Anna. Sure. I actually haven't heard many people disputing that we need an energy mix. That is indeed right. But if you think about how that's going to look like in the 2030s. So you've got capacity that we already have on the system retiring. If you think about the gas and the nuclear that's going to come off the system in the 2030s, that's well over 15 gigawatts that's going to come off the system. So we need something to plug that gap at a time when we know that demand is set to be rising. And now what is the cheapest and what is the quickest way to plug that gap? Offshore wind is the quickest one to build because in gas as well, we've seen that supply chains are really constrained.

18:24Globally, there's a huge amount of demand. And if getting a new gas turbine a few years ago meant that you had to wait about three years, now you had to wait about six or seven years. So it's not as quick. Now, on the point around cost, again, if you compare build of new infrastructure, new offshore wind, as we've seen yesterday, costs£91 per megawatt hour. New nuclear, Hinkley Sea, has a strike price of£124 per megawatt hour and new gas,£147 per megawatt hour. So it is by far the cheapest option. And in addition to that, studies across Europe have shown that a renewables dominated system is the cheapest one bar none.

19:07Now, of course, we need to keep investing in grid capacity and in flexibility and long duration storage. But that study showing that the renewable system is the cheapest one already takes into account those figures. So, of course, we need an energy mix. No one's disputing that. But if we think about our energy security and what we need to bring online to keep meeting demand, offshore wind is the cheapest and the quickest way to do it. And I think comparing current cost of gas with cost of new offshore wind is a bit like comparing what you might be paying monthly on rent versus the monthly payments that you might be making for building a brand new house.

19:45what the prices that we're seeing for gas that is generating today in the wholesale market that is a price for an asset that has already been built and is already generating and will sell you at very different costs what it was really called last week the prices went a bit higher whereas with the prices for new offshore wind you're seeing the price of getting the asset built and once that's done the fuel costs are zero and the operational costs are very low so again a really good investment but we we need to consider that fair comparison between new assets not new versus existing assets and what about time frames and deliverability anna i mean we're talking about this with rail yesterday on the program so i'm just looking at the front page of the times is business section today we will miss 2030 clean power target rwe cast out on milliband's energy goal so this was um the german company rwe one of the big wind turbine uh manufacturers they got some of these contracts yesterday they're saying um not expect all of its projects to start up in time to meet this 2030 goal is pace and kind of deliverability still some of the questions here so that's obviously really critical um if you could have all of these projects being ready by 2030 or or thereabouts so um yeah not even if not exactly bang on 2030 uh not very far very late after.

21:07But what's really critical is that we continue investing in supply chains and the grid, because usually that's what holds up delivery the most. So with supply chains, we know that for, again, for every infrastructure and for offshore wind as well, right across Europe, we see surging demand and supply chains that are yet to catch up. It's another reason why the auction yesterday is really important, because we have capital that's willing to be deployed in new UK supply chains, building on the over 150 factories that we already have. But what we hear from our members in the supply chain sectors is they need to have clarity on that pipeline and on future demand.

21:46And it's really important that AR7 yesterday has provided that. And we're hoping to see a steady drumbeat with the next allocation round. Likewise with GRID, this government and the previous one has committed and understood the need for building more transmission capacity. Again, I will remind everyone this is not just for renewables. It's for the wider economy because we're electrifying and our grid is quite old and we need more transmission capacity. That is proceeding at pace, but we definitely need to keep the momentum and make sure that we build all of those assets together. In addition to long duration storage, flexibility to enable us to make the best use of this new technology that we're deploying.

22:26And just as part of that, Anna, because Keith's texting while you've been chatting this morning, just asking in particular about battery storage and lack thereof. Yes. So there is actually quite a significant pipeline of battery storage and other storage technologies which are ready to be deployed. We absolutely need to have these built because they're going to reduce the cost of the future system. So, you know, we've seen with government, if there is a laser focus on getting technologies to market, on driving costs down and getting good value for money, it can be done. We've seen that yesterday with offshore wind.

23:02We need that same laser focus with those storage technologies and likewise with flexibility, with demand flexibility as well. That's how you get that cheapest future system that I was mentioning earlier. You need all these tools, not just generation. and if you've got a question by the way as well of course 85058 is the text number to do as keith did and get that into our panel this morning quick final one and as i was looking through the numbers yesterday as they they came out floating offshore wind which has been this area that people have put a lot of stock behind right as something where you can move it around and sort of chase the wind a little bit the strike price for the two projects that were in there were astronomical compared to the fixed ones the 90 pound figure that you gave i mean it was it was basically triple it wasn't it as well i mean does that sort of scupper that actually in the hopes for that area if you've got it at 200 odd pounds as the as the price of energy that those particular bits of technology are going to produce so uh yes indeed the price is higher for floating offshore wind which is entirely normal and what uh what we would expect the reason for that is because this is uh this is a newer technology.

24:13It's a technology that's being deployed in much more difficult conditions. The idea behind floating offshore wind, as you said, is you're deploying it much further out at sea, and it's enabling you to build further out and also export that technology. Now, the UK is really lucky to have a pretty shallow seabed where we've built a lot of those fixed bottom offshore wind farms. But if we are to build another geography, build further out at sea, we definitely need floating wind. But because of the technological complexity, because it's a fairly new technology to financiers, we do see those higher strike prices, much like we've seen with fixed bottom offshore wind in allocation round one.

24:50So, you know, in about 2014, when we started allocating these contracts, offshore wind was expensive. It came down the cost curve. That's exactly what we like to see with floating wind. And bear in mind, actually, you cited those strike prices, which, yes, they are higher, but at the same time, much less capacity has been awarded. So we have 8.24 gigawatts of fixed bottom offshore wind and only 192 megawatts for floating wind. So the total spend is not going to be huge. But it's really important to continue deploying different projects for floating offshore wind, because that's what's going to enable us to get financiers comfortable with that technology and also get the technical know-how so we can start cutting costs.

25:34we've been really excited to see excited to see those projects in uh different geographies and in wales as well you need to deploy in different conditions so you can cut those costs as quickly as possible and i thanks so much for your time this morning and i'm the executive director of policy at renewables uk we'll get the thoughts of our panel on that in the second half of the program where we're also going to be uh chatting through what's going on with southeast water and the latest there as well and also the future for tgi friday has been a bit of a staple hasn't it of various shopping centres around the UK.

26:03A company in trouble. We'll be chatting about that too in the second half of Wake Up to Money. Wake Up to Money with Will Bain. Morning, welcome back to Wake Up to Money on Thursday the 15th of January where our panel this morning are Shanti Kellerman, the Co-Chief Investment Officer at Seven Investment Management and Daniel Todaro, the Founding Partner and Managing Director of the marketing agency Gecko Group. Your text coming in on what we were chatting about there about the new offshore wind projects at one in the government auction yesterday. Alan in Gifnick been in touch saying, as a 60-something homeowner, I want jam today for my energy costs and less interested or motivated by jam tomorrow.

26:44Daniel, that basically, in a nutshell, sums up the debate around all this, doesn't it? I mean, it's good for the future and, you know, 7 ,000 jobs predicted to be created out this and you know a boost to local economies etc but it's about the bills that we're paying today and how we bring that down the reality is is that this this you know I think it's about half wasn't it that they were going to shut down in nuclear etc by 2030 the reality is that probably won't happen it will get downgraded to maybe a third or a quarter of that that usage by that date but you know it's progress and it's a good thing that this is happening and I think it's a good thing for everybody that this is happening now and that they can expedite it as soon as they can it takes a long time to build this kind of stuff.

27:29Shanti saw a lot of frustration on social media yesterday for example from normally pretty sober minded people about just this fixation on one bit of energy or another so yesterday you know the government trumpeting all of this with wind we did hear that view a little bit about the importance of an energy mix but a real kind of frustration that almost sort of dragged from one shiny thing to another it's going to be nuclear as uh as daniel was saying it's going to be wind rather than focusing on trying to sort of untap the wider kind of range yeah i think we we want it all um but you know having low energy or low commodity prices is a huge tailwind for economic growth because you know it lowers our you know our heating bills it lowers business costs for those that are in manufacturing so i think you want a diverse mix because some things will get more expensive and be cheaper and it protects you from things like what happened in 2022.

28:25I think the big challenge is you build it, but then we still have that challenge of getting all of it into the grid, managing what we're buying and when, and that's where there's a lot of investment needed. And if you think about the stuff that's coming with AI and all the data centers, we're going to need more energy to manage that. So So I think you have to think ahead and I think you've got to be bringing new things online, you know, in nuclear and in wind and make sure you have all the gas links and things like that as well. Daniel, that's a really interesting point, isn't it? One, the kind of the greater need for all of this stuff, particularly as we use more AI.