Energy efficiency, electrification and the next phase of net zero
On this episode of the Hypercube Energy Podcast, Adam Sroka speaks with Dr. Steven Fawkes, Managing Partner at ep Group, about what has changed most across four decades in energy and why the next phase of the transition will depend as much on efficiency, finance and human behaviour as it does on new technology.
Steven reflects on the extraordinary shift from a world dominated by coal, nuclear and conservation to one shaped by renewables, storage and distributed energy. He explains why electrification and energy efficiency need to be seen together, why large organisations often struggle to change even when the technology is ready, and how finance still favours standardised, scalable products over fragmented efficiency projects.
The conversation also explores the rise of distributed batteries, flexibility and virtual power plants, the role of de-risking tools in unlocking private capital, and why organisational and political power are deeply tied to how energy systems evolve. Adam and Steven discuss the hidden barriers that slow change, from business models and maintenance revenue to institutional inertia, and why some of the most powerful advances in the energy transition may come from better incentives and better system design rather than from new hardware alone.
Adam and Steven cover:
- What has changed most in energy over the last 40 years
- Why energy efficiency still struggles for attention and investment
- Electrification, distributed batteries and the future of flexibility
- How finance, standardisation and de-risking tools shape the pace of change
- The organisational and human barriers that can hold back innovation
Explore more with Dr Steven Fawkes and ep Group
Visit ep Group's website
Connect with Dr. Steven Fawkes on LinkedIn
Read Steven Fawkes’ blog, Only Eleven Percent
Browse Steven Fawkes’ books
Explore EP Pixii distributed energy solutions
CHAPTER MARKERS
Chapter markers
[00:36] Meet Steven Fawkes – EP Group
[02:45] 40 years of change in the energy system
[05:24] Why the transition is only halfway complete
[07:19] Why energy efficiency is overlooked
[10:00] Electrification vs efficiency: getting the balance right
[13:17] Comfort, buildings and real-world energy use
[15:13] What makes an energy project investable
[17:03] Why standardisation matters for energy finance
[20:38] Can AI accelerate standardisation and investment?
[22:02] Using data to make smarter energy investments
[23:52] Distributed energy, batteries and flexibility markets
[25:48] Decentralisation and the future of power systems
[27:12] Innovation vs incumbents in the energy sector
[29:01] De-risking tools and unlocking private capital
[32:21] Organisational and human barriers to change
[36:48] Why “good ideas” often don’t get implemented
TRANSCRIPT
Hypercube Podcast Transcript
Title: Energy efficiency, electrification and the next phase of net zero
Host: Adam Sroka
Guests: Steven Fawkes
Steve Fawkes (00:02)
this close link between electrical power and political power. Doesn’t matter what country you’re in, there’s always been a very, very close link And when you start to decentralize electrical power,
It’s going to be really interesting to see what impact it has on the political bow.
Adam Sroka (00:36)
Hello and welcome back to the HyperCube podcast. This morning I’m joined by Dr. Stephen Fawkes who is managing partner of EP Group. Stephen, thanks so much for joining us. Would you like to introduce yourself and EP Group for the audience please?
Steve Fawkes (00:52)
Sure, thanks Adam. Good to be here. So I’m Steve Fawkes, Managing Partner at EP. And at EP, we have a mission of accelerating the shift to net zero in a regenerative economy. And we do that by combining progressive ownership structures with some catalytic capital. And within that group, we have a number of companies, we have a consultancy that works with corporates, investors in the public sector.
an architecture practice focused on sustainable buildings, a JV with the Indian State-Ained Energy Efficiency Company that’s invested 60 million pounds here in the UK, and a partnership with an investment bank that raises capital, and a JV with Pixi AS, which is a Norwegian battery integrator. And with that joint venture, we’re developing distributed energy projects. So I suppose my role is really
to spot opportunities and put resources together and a bit of catalytic capital and get them going. So I suppose that is a classic entrepreneurial role.
Adam Sroka (01:53)
Yeah, I was going to say no two months can be the same surely in a role like that.
Steve Fawkes (01:58)
Well, that’s right. Sometimes people have difficulty understanding what we do, but that’s what we do. And we like the variety. And there’s so many different fields to do good stuff in that we like to do that.
Adam Sroka (02:05)
really exciting.
Yeah, and I just always think that energy is like that in the it’s just naturally messy. You’ve got land buildings like assets, capital, all that. It’s requires a lot of greasing of wheels and very clever people wading through mountains of documentation. I guess, like when we had the the warm up call for this episode, you had some fascinating insights and like you’ve seen quite a few changes over
and across the energy sector, if you look back from where we are today, what’s the most interesting changes you’ve lived through or what would you see as the least foreseen?
Steve Fawkes (02:45)
Well, I think back then, and we’re talking about the early 80s, so 40 years, although it’s hard to imagine, I think the changes have been literally unbelievable. If we could have seen what we know now, back then we would not have believed it. So, I a couple of examples that come to mind. Back then we had a subsidy program to help industrial users switch boilers from oil to coal in the name of energy security.
And of course, there were pilot solar and wind projects in various parts of the world, all very small, all government paid for, all subsidized. And we talked about renewables as alternative energy. I The standard view of the future, the future that we’re now living in, was that energy would be dominated by co-nu-co, as it was called, which is coal, nuclear, and conservation. We just could not have imagined back then the growth of renewables and storage.
You know, we always talked about storage as being almost impossible other than pumped hydro storage. And of course, there was a sort of burgeoning environmental movement. We didn’t really talk about global warming. And then finally, I think the big change is the energy and the whole energy transition has become, I’m not sure this is the right word, but sort of fashionable and attractive to entrepreneurs,
as well as open to the private sector. Whereas back then it was all dominated by big companies, nearly all publicly owned monopolies, all controlled directly by the government. So when you add all that up, both the technical, the market and the, I suppose, organisational changes, they’re all fairly incredible to have seen that change.
Adam Sroka (04:21)
I am once attended a talk by like global CEO of one of the world’s biggest banks. And they were talking aligned to that point of environment and climate stuff being fashionable. And they talked about how they had a trillion in under management or a trillion invested in asset classes and products that had to move from where they were. And they were pointing it all at green.
effectively all had to go green. And you just think like that scale, the numbers are daft and that you can then see how when a big, enormous bank like that makes a statement like that, or makes a 15 year plan to do something like that, the natural consequences then, yeah, private equity, venture capital, like it all kind of follows suit. And you can see what happens. Interestingly, we spoke before you said that we’re probably only about halfway through the transition. What do you think like that?
from your longer term perspective, must be easy for you not to get lost in the day to day and the immediate the next six months or whatever the hype cycle is talking about now like, impart some wisdom on us from your point of view.
Steve Fawkes (05:24)
I suppose it’s absolutely right that we have a very high level of ambition. But as you say, the change is absolutely enormous. You’re talking about every building, every vehicle, every piece of infrastructure, all of that needs to be changed. And I think I was always a fan of science fiction. And one of my favourite science fiction writers was Arthur C. Clarke.
And he once said, we always overestimate what we can do in the short term and underestimate what we can do in the long term. So you get lots of little changes that add up to a big change in 40 years or so. And also I think people still forget about S curves. These things do move in S curves. So they move slowly for a long, long time, what seems like a long time, and then they suddenly flip up. And we’ve seen that obviously with solar batteries and EVs.
recently that we’re just really getting into that high-growth part of the s-curve. So I think that sort of view of change is really really important to understand s-curves but also as you say the scale of it is massive.
Adam Sroka (06:22)
Yeah.
The S curve piece is like this analogues to what’s going on in AI as well. So AI has been around forever and it’s been moving at a pace it’s been doing well. And then three years ago, it’s all changed and it’s dominating everything. Every company is now an AI company. And so we’re seeing it play out there and it’s having a knock on effect on the forward planning for energy systems and how some of the
hyperscalers are going to hover up all the clean water and all the power to generate more AI and I’m not quite sure how that all plays out in the long run. I was talking to people in Texas a while back about it was just at the time that is it the Stargate or the Fargate project for and it was like 500 billion investment and I said look 30 % of that’s going to be energy infrastructure probably more like it’s all a good buying chips and data centers but have you got the
Steve Fawkes (06:57)
Yep.
Adam Sroka (07:19)
capacity to run them at that scale. think, wanted to touch on your blog, only 11 % and highlighting how inefficient the current system is. Like, why do you think we’re not so great at energy efficiency? We’re all very good at new technologies, new, like just more oomph, but why we so, why is that not getting the attention it quite deserves?
Steve Fawkes (07:42)
Well, of course, it never has. And Part of the problem fundamentally is that it’s invisible. It’s the absence of energy use. It’s also really hard to stick a meter on it, although we now do have metered efficiency as a concept using smart metering and clever algorithms. But I mean, another reason is it’s just quite, and this was a really hard thing to accept after many years working in the industry, that fundamentally energy efficiency is boring
for most people most of the time. It’s just dull and I think even saving money, which is often equated with saving money, it’s like if I said to you, I’ll give you a hundred pounds or I’ll save you a hundred pounds, I think you’ll probably take the hundred pounds in cash rather than the savings. It’s just fairly dull. And I say that was hard to accept, but it’s true. And I think you have to accept it to recognize the barriers.
Also, particularly as engineers, and I am an engineer, we do love fancy big equipment like big wind turbines or engines or trucks or boats or whatever it is. And energy efficiency tends to be this little aggregation of tiny, tiny little things. You know, everything from thermostats to, I think, more efficient controls, more efficient light bulbs even. And as I always joke,
It was a kind of thing in the 70s in the oil crisis to stick foil behind radiators and a lot of my elderly relatives thought for a long while that’s what I did every day. It’s pretty dumb, but I’ve never actually stuck foil behind radiators.
Adam Sroka (09:08)
Hahaha
It’s always time, the next gas price spike or whatever. Yeah, I get that. And we actually had a call this morning about that very thing within delivering technology and how it’s so easy to inflate the scope or just deploy more technology because most of the people that are in engineering roles do it because they love that bit. Whereas turning things off and sort of
Steve Fawkes (09:16)
Yeah.
Adam Sroka (09:41)
making things smaller or like that’s just not as fun it’s not like what you were doing when you were a child dreaming of building things and who doesn’t want to order a great big wind turbine blade and like see it delivered
Steve Fawkes (09:52)
Exactly,
yeah, it’s much more fun and they, they’re real barriers, they’re human barriers I suppose.
Adam Sroka (10:00)
So there’s been a huge push towards electrification though in recent years. We’re seeing it happen. I think the electrification of transportation has like kind of brought that on a lot. And then you get the cyclical knock-on effects of better investment in battery technology plays out into that self-perpetuating cycle. Like how do you see the relationship between electrification and the efficiency? And like, is there really where the…
we’re getting it wrong or industry is getting the balance quite wrong.
Steve Fawkes (10:28)
Yeah, I think obviously that’s become quite a debate recently in a way that the difference between electrification and efficiency or the potential conflict almost between them two. But you have to think about the system level that you’re talking about because clearly if you electrify heat or your electrified transport and especially of course if it’s electrified with renewable power, you do get this massive gain in efficiency because if you’re taking out a power station.
which is a 30 % efficiency, maybe 40 if it’s a state of the art, you inherently have a great big efficiency saving, but that’s a different level. If you’re talking about sticking a heat pump into a house and you don’t do anything to the house from its actual energy efficiency level, the amount of energy used is the same. So at that level of the system, there is no energy efficiency, but if that’s renewable power driving a heat pump instead of gas or
or power coming through a fossil fuel power station, there’s a big energy efficiency saving in the system. So think it’s important to think about the system. The thing that I sort of object to now is There’s this school of thought that if we have abundant cheap solar and batteries, which we’re beginning to get, we shouldn’t worry about individual appliances or buildings and their efficiency. And I fundamentally disagree with that because I think, first of all,
if you improve the efficiency of a building or an appliance, it has savings throughout the system all the way back to your solar farm, and everything else. Plus, so it would take less capital. plus, of course, I think as I wrote in a blog a long time ago, was about the elegance of design. It’s just so much more elegant to have energy efficient appliances than inefficient appliances. Even if your power is free and abundant.
Why design something that’s and put up with something that’s not efficient? It’s just so much better and we definitely need more elegance in the world. So I think energy efficient design is elegant. I think also with electrification, this sort of efficiency first versus electrification first is now, as you say, a hot topic, but I think it’s absolutely right to make the building or the end use as efficient as it’s viable to do. And of course,
That could be a lot or it might not be much, but you have to look at what’s viable on each individual site. And that includes the technology, the economics, the human factors. Some places you can do it, some places you can’t. I live in a block built in 1900 and it’d be really hard to put any energy efficiency, significant energy efficiency on it other than a full scale, massive cost, passive house retrofit. But we could use a heat pump. So the system would be saving.
we wouldn’t necessarily be saving energy at the building level.
Adam Sroka (13:17)
Yeah, and it’s funny, that’s definitely the engineering you speaking, because the elegance energy efficiency. The reality of it, think, like people don’t think about the second, third order effects and like, okay, fine, there’s loads of solar now, wonderful, and there’s abundant generation. That doesn’t change the big problem in energy, which is the transmission system and high voltage
skilled and high-voltage manufacturing, like that whole part of the system is a huge bottleneck. So just add more solar doesn’t solve the problem. whereas make everything more efficient does. And I think secondarily, like, yeah, I’ve lived in, I now live in a new build, but lived in lovely tenement in Glasgow. And like no one that I know that lives in a tenement is.
is satisfied with how warm and how cosy and how easy it is to eat. They’re lovely houses, but it’s hard, right? Because they’re just not built with modern materials, modern construction approaches. so I think it’s when you get into the lived experience of humans in inefficient environments, you just get, you can just sense the dissatisfaction, the kind of flavour of it, right?
Steve Fawkes (14:06)
Yeah, yeah.
Yeah, and you don’t, that’s absolutely right. You don’t realise how bad it is unless you go and stay in a passive house or live in a passive house and then you suddenly realise how comfortable they are. And actually your whole life you’ve been uncomfortable, but almost unconsciously because that’s the norm, you know, like having cold walls that you’re radiating to heat to makes a difference.
Adam Sroka (14:33)
Mmm.
So, you’ve worked at the intersection of energy and finance, and I think it’s like a really interesting place to the people that work in this space, because it’s quite niche, but really impactful. And it’s not just like derivatives and financial products that the immortals can’t understand. It’s building stuff and like things that relate to every day. In your experience, what makes like a good energy project? Like what makes it investable and
why is efficiency, like large-scale efficiency, of struggled historically on that front?
Steve Fawkes (15:13)
Well, I mean, first of all, of course, any investment has to have financial returns if it’s a private sector investment. I think the team who are designing, executing it are critical and all the contracting around it. And I suppose all of that adds up to de-risking, something that has been talked about a bit more recently about how do you de-risk projects.
And then the scale issue is really important because financial institutions in the city or anywhere else can only sensibly deploy millions of pounds in one go because the transaction costs are so high. And also, as I’ve said many times, and they don’t really like this, but banks and financial institutions are just factories. They can only deal with standardised products financed in a standardised way. And as we said earlier, energy efficiency comes in.
very small packages, it’s hard to measure, it’s got high transaction costs. It does have some risks despite energy efficiency, people saying for years it didn’t. And therefore it’s kind of hard to invest in. And these things all add up. So yeah, scale, risk, transaction cost, team, implementation, de-risking.
Adam Sroka (16:26)
As a bootstrap startup founder that’s been around the merry-go-round with a few private equity venture capital types, I can sense echoes of that standard product, standard understanding of what makes a business. And yeah, when you don’t quite fit the mold, it makes life quite hard. You’ve talked about standardization in the sector and how it’s critical if we want real markets to form, especially for energy efficiency. It’d be good to just like…
expand and define. There’s a lot of non-financial people here like in the audience so define that what does that mean and what are the benefits and what does it bring to us if we can achieve it.
Steve Fawkes (17:03)
Sure. Well, standardization is absolutely essential for any market or financial market. And it’s a bit like going to a green gracer. You buy a kilogram of potatoes, for instance, the kilogram is standardised. mean, obviously, maybe even today, there’s people who fiddle it and lean on the scale or whatever. But, you’re buying a standard unit and so you can have a market. And it’s the same for any of the
Adam Sroka (17:18)
Hmm.
Steve Fawkes (17:28)
financial markets, you know, we talk about commodities markets like the Chicago Board of Trade or whatever it’s called now where you buy a bushel of wheat or a pork belly feature, but all of those are really defined. And also, even if you think of something closer to home, like a car loan or mortgage, if every car loan or mortgage had to be a bespoke document done in a bespoke way, you just wouldn’t have that kind of market, which is absolutely essential.
And The problem with efficiency is traditionally the way that projects have been developed and engineered has been very non-standard. And I think that’s partly because it was never really big enough to justify developing standards. Whereas, you know, When wind power came along originally, there was no standard way of assessing a project and then pretty quickly, the banks and everybody agreed a standard way of it. But in energy efficiency, it was never, never worth it.
And That’s why we introduced something called the Investor Confidence Project to Europe, which came from the US and we brought it to Europe with assistance from the European Commission. And that introduced the standardised way of developing and documenting energy efficiency projects and when we did that, it was proven to reduce transaction cost because people didn’t feel the need to go and hire a separate engineer to review the project
and it reduced performance risk. So, you we worked with a big insurance company that was insuring projects and they said, if you have a project developed to this standard, we will charge you a lower fee for insuring it. So that kind of proved the principle, but unfortunately, it’s still not widely used. I think the energy efficiency people tend to view their little kind of way of calculating things as proprietary and fundamentally it’s not.
Adam Sroka (19:04)
Mm-hmm.
Steve Fawkes (19:19)
You know, as I always say, if you had four energy engineers work out the savings from a simple LED project, you probably get four different ways of calculating it. And that just doesn’t work for banks and financial institutions because they look at one and go, oh, look at another one. This one’s different. What can we do?
Adam Sroka (19:35)
not compute and that’s it out maybe out with the bath water and I totally get it yeah that’s like yeah exactly and I think people forget that like that’s actually the default is to say no because it’s the cost the cost of a kind of false positive or whatever is so high when I think about systems like that like why is it that way and it’s
Steve Fawkes (19:38)
Yeah, exactly. Easier to say no.
Adam Sroka (19:56)
built by humans over decades and like we are converging on a core truth or maybe circling it for years but we never arrived there and
lawyers and financiers and consultants. They’re very human professionals, like the professions that require expertise and things. And now what we’re seeing with AI just come and obliterate large swathes of like the human work that was done before. Do you think that we might see an accelerate towards standardization as more like
companies try and take on the big complicated human manual work and turn it into sausage factory, yeah, spitting out similar things.
Steve Fawkes (20:38)
Yeah, I think there is a trend that way, obviously, with all the data from smart meters and every other sensor and sensors are so cheap now and these sort of digital tools, ultimately in feeding into AI, that becomes an easier way of standardizing it. And clearly the banks and financial institutions are interested in that because it will help standardised.
And if you can standardize it, that makes it easier to finance, as I said. So it definitely has a role to play. think, well, you and I have talked before about AI, think. mean, obviously, it’s going to be massive, but at the same time, I have a high degree of skepticism. And one should never forget the old computer expression that we brought up on it, which is garbage in, garbage out. And that’s a bit worrying. But fundamentally, data collection. And I talked about.
metered efficiencies earlier, you couldn’t have that without smart meters and massive data transfer and data processing in a way that again we could never have imagined in the 1980s when we’re using remote mainframes to do things on the odd occasions we got to use a computer.
Adam Sroka (21:45)
And yeah, I think it’s hard to even like five years ago understand where technology was going to get to. Do you think that data analytics, digital tooling, do you think it’s making projects more investable? Do you think it is helping?
Steve Fawkes (22:02)
Well, I think it will, as I said, you know, and I do like the metered efficiency example, which comes from the US and pioneered by the Open EE meter and a company called Recurve Inc. founded by a good friend of mine, Matt Golden. And that sort of metered efficiency approach allows utilities to really optimize their investment. So they’re trying to, they’ve got money to spend, some of which is sort of
Adam Sroka (22:07)
Mm.
Steve Fawkes (22:30)
grant money as we would call it or program money and they’re affected by obviously solar and batteries and their load curves are changing and they can really use data to be very precise in saying well in this particular area near to this particular substation it would be sensible for us to spend some money subsidizing heat pumps for instance whereas in another area it might be better to subsidize something else and so you get that very precise
targeting that can only come from big data, I suppose, and analyzing it in that way. Whereas in the past, it would be based on not much data really and traditional engineering approach, which would have been, let’s spend 50 million upgrading the substation or whatever.
Adam Sroka (23:20)
Yeah, I’ve not thought of it like that. you’re looking at, you’re finally kind of able to look at the other side of the equation, even though, because it’s intractable to a single human, but now the tooling’s there, you can look at it and actually the asymmetry and investment and change and all that makes quite the difference. ⁓ So what about like, developments like distributed batteries, more flexibility, virtual power plants, do these excite you?
Like how are we making the right use of them? Do you see them evolving over the next decade?
Steve Fawkes (23:52)
Yeah, I think that’s going to be the biggest sort of impact over the next decade. And that’s why we’re working on all of those things. I think that sort of Cheap solar and cheap batteries, you know, people haven’t really caught up with yet and you know, they will only get cheaper and better performing. as we know. So I think we’re just at the beginning of that revolution, if you like. and fundamentally, what it tells you is every building should be a solar
generator and every building should have a battery. and and batteries at all scales. We’ve seen some business models in the US which are people giving away batteries and then obviously benefiting from the flexibility and giving the consumer some benefit. And then you’ve also seen electric cookers were built in batteries even that can talk to the grid. So I think at every scale from a big industrial and commercial site down to a house and even down to appliances perhaps,
you will get those sort of developments with batteries and flexibility markets. And that’s really exciting because I mean, we just saw recently, I think in California, think that one day was it February the first when the whole demand for 24 hours was basically about by solar and the portfolio of batteries across the state. And again, if you’d gone back 40 years and said, ⁓ know, California will be able to do that. Everybody would laugh you out of court. It would have been impossible. And
as it gets cheaper, that will inevitably spread. you know, I think that is science fiction coming true really. And the other interesting aspect of all of that, which I always flag up is this close link between electrical power and political power. Doesn’t matter what country you’re in, there’s always been a very, very close link between political power and electrical power. And when you start to decentralize electrical power,
It’s going to be really interesting to see what impact it has on the political bow.
Adam Sroka (25:48)
Anywhere you’ve like, is there anywhere at the forefront of that happening that you could point us at and that you think or are we still too early?
Steve Fawkes (25:55)
Well, I think you’re still seeing this sort of battles between the incumbents and maybe we can we talk a bit about that. know, the incumbents obviously want to stop it and they have in many places, you know, certain states in the US, there’s been corruption cases. But at the end of the day, the power company has a lot of power over what happens directly. And they have a lot of lobbyists, whereas the energy efficiency people and individuals don’t say this.
Adam Sroka (26:02)
Mm-hmm.
Yeah.
Steve Fawkes (26:23)
The battle will play out, at the end of the day, economics tends to win.
Adam Sroka (26:28)
And do you think that ends up being like a barrier to true innovation as well? Like from where I see it, I’ve just spoiled a lot. do. think that if especially public capital, but also even private investment was more centered around some of the groundbreaking stuff that could happen and wasn’t just concentrated into the pockets that have been.
doing the same stuff for years, I think we would see a lot more change because anyone that’s done business with large enterprise scale incumbents will understand very quickly how hard it is to achieve innovation in some of these organizations because yeah, surprise, surprise when you add 10,000 professionals into the mix that all have an opinion, get a lot of disagreements.
Steve Fawkes (27:12)
Well, I think there’s always going to be noise and propaganda from incumbents as well, and as I said, lot of lobbying and roadblocks. Plus, of course, the energy industry, for good reason, is very tightly regulated. Regulation takes time to catch up as well, as we’ve seen here. And in all countries, regulation is trying to catch up with these changes. I think I say big corporates.
There’s a difference between big corporates and startups. Big corporates have a proven business model that they operate. And woe betide if you try and change it, it’s really difficult. Whereas startups are of quasi organizations looking for a business model that works that they haven’t quite found yet. And when they found it and it’s operating, they grow and then they get absorbed into bigger companies. And so it’s very hard in big companies to…
to innovate, know, they all have innovation centers and innovation directors, but it’s really hard because you’re fighting against a system that works every day and generates returns every day.
Adam Sroka (28:13)
had the head of innovation from NISO on recently and like that is an, I think an unenviable job. Great fun, significant like breadth and power, ability to really make significant change, but cripes must be difficult. Like so heavily regulated, all lives are watching you, you’ll upset someone no matter what you do, that kind of role. But I think good to see how she gets on and like the things that happen because they are doing some interesting stuff.
Steve Fawkes (28:40)
Yeah, they are. That’s good. Yeah, they are. And I think they do well. But as you say, very difficult to make that kind of change in big organizations.
Adam Sroka (28:40)
especially about data sharing and transparency.
And is it true, we talked about the US a little bit, is it true on the continent, like you’ve worked quite closely with a lot of European initiatives. What lessons do you think we could learn from people over in the continent?
Steve Fawkes (29:01)
Well, I think they have taken on board more this idea of what I call de-risking tools and transaction enablers. And de-risking tools can be anything from guarantees or first loss reserves, things like that, that de-risk a project. And then transaction enablers could be anything from sort of aggregating small projects to things like the investor confidence.
project that helps transactions move forward. And then even framework agreements. And, you one that I always quote here is the Carbon and Energy Fund, which is not a fund, but it operates as a framework in the NHS and helps them develop big energy saving projects. So it helps accelerate and enable transactions to happen. And I had written a lot and talked about this these ideas for a long time and
Back in the day when we had a green investment bank, was quite vacal saying that’s what they should be doing rather than lending money to projects that would attract private money all day long. And then they set the National Infrastructure Bank and I said the same and they kind of did the same. And now it’s the National Wealth Fund. I think they’re starting to think about these things. There’s been a bit of an emphasis on guarantees. I think the problem being skeptical.
Adam Sroka (30:09)
Hmm.
Steve Fawkes (30:24)
is that, you know, investment bankers, like everybody, to incentives. And when the incentive is to do deals, they tend to do the biggest, simplest deal they can do. Whereas the ones who really need like energy efficiency or whole house retrofit or stuff like that is actually really difficult. So I think if I was chancellor for one day, not that I want to be chancellor, but if I was chancellor, I’d make sure all the public money went on de-risking tools and transaction enablers.
that actually allow the private money to flow. institutions like the EU, also ⁓ development agencies, like the World Bank, kind of talk a lot about this. And it’s really proven. I I wrote a whole guide to financing energy efficiency for buildings in the Arab region for UNESCO, the regional UN agency. And that really captures lots of thinking and it captures a lot of the
international examples which really show that that works. So you know for a small amount of public money you can capitalize a large amount of private money if you put these de-risking tools and transaction enablers in place.
Adam Sroka (31:36)
Yeah, I like that idea. I could see how that plays out where the government is effectively playing that safety net role, de-risk things, make everything easier and easier and easier so that all the risk can be captured by…
private money and venture funds and start-ups and stuff because that’s what they’re there for, right? Is to try and make a big upside, whereas the government doesn’t need to make a huge upside. It just needs to make sure things move and the private sector is doing well enough. But yeah, I’ve not thought of it that way around.
So you’ve written a lot about the kind of non-technological stuff as well, organisational barriers like cultural issues in organisations and non-technical stuff that acts as a barrier to the transition. Like where do you think the biggest ones are and what are the lessons learned for people in unions?
Steve Fawkes (32:21)
Yeah, well, we’re all human and human factors are always a big impact. personally, I love this kind of technological change and everything we’re talking about, but I don’t like change in many other areas of life. That’s just the way we are, isn’t it? It’s weird. you know, organizations are hard to change. Like I said earlier, big organizations are machines that set up to run proven processes. That’s what they are, whatever else they might say.
And it’s hard to change those processes and it’s hard to change people out of their comfort zone. And I’ll give you a specific example, which is Edina. Edina is a leading gas engine, CHP and stationary power company. And we’re invested in it alongside EESL, the Indian agency that I mentioned at beginning. And in that company, you have literally some of the world’s experts in gas engines. And when we said, well, look, okay,
Gas will last perhaps longer than some people think, but you’ve got to really think about batteries and alternatives. And of course, everybody came back and said, well, there’s no market. We don’t know anything about batteries. There’s no maintenance revenue. It went on. And then finally, they said they looked seriously and they developed a battery product. And now a good proportion of their revenue is from battery projects and hybrid projects.
But they had people who are experts in gas engines. can’t expect them tomorrow to be experts in batteries. It just doesn’t work that way. And we’re all attached to our kind of past identity and our education and training. And it’s really hard to change that stuff. And I think also that’s also a good example because with gas engines, just like with internal combustion engine cars, there’s a huge tail of maintenance revenue.
which is really important. mean, the car dealers are facing this problem big time now. It’s like, hang on, if everybody switches to EVs, all those spare parts, all that work that’s done to maintain your car, all that revenue flow just completely disappears. And it’s like, oops, now what do we do? You do. That is a major fundamental problem that stops change really. So yeah, the human factors are always, and organizational factors are always important.
Adam Sroka (34:23)
new bucket.
Steve Fawkes (34:39)
And they’re usually there’s kind of rational reasons behind them. And it’s really, really easy when you’re on the outside and say, oh, you’re just being stupid or irrational. You don’t know what you’re talking about. But actually, when you analyze it, it’s totally rational that people wouldn’t want to change.
Adam Sroka (34:53)
I, when I’m sort of like helping people become consultants and think about it, I talk about that very problem and I say no one knowingly makes an irrational or stupid decision. Very rarely do people on purpose do something that they know to be wrong. So no matter how stupid or silly you think the other person is, they have reasons to think they’re right. And your job is to understand those reasons.
bridge the gap. it’s, think, like I learned that when I was quite young, actually, in my career, and I think it’s helped me so much that, like, everyone has a history, the sonda, right, they’ve got a full life, they’ve got a history, they’ve got a background, they’re not being awkward for the sake of it, there’s a there’s a good reason. And if you just get to the reason, they usually defrost and you usually go out hand in hand and tackle the problem together. It’s such a thing. I’ve got
separate about being able to put down past experience and education. I’ve got a manager at the moment in Hypercube who’s going on the journey of learning leadership and things and she’s very much, she’s excellent and she’s very much struggling with the not being the techie that with the hand on the keyboard build the thing and giving it up to other people and I kind of said Luke like my job all my job now is to talk to people I just talk all the time.
because that is actually the kind of programming language of organisational action, right? Like trying to, I know that my system, like by making my systems and my processes and the team work, someone that’s much better than me at hands on keyboard will do the work better than me. And you just have to give up that trust, but it is so difficult to go, okay, I’ve spent all these years learning this niche technical skillset that I’ve been paid for and that has to go.
because the next tier of whatever I’m trying to achieve actually is a completely different game. I identify with that question.
Steve Fawkes (36:48)
Yeah, I did write about this fairly recently. fact, I say I wrote about it recently, I kind of reused some of my PhD from the early ages and the title of it was Dengtasum Sloth Bias or Ignorance. And where that came from was energy managers are always saying, I’ve got all these great two year payback projects and management won’t do them And sometimes there’s perfectly rational reasons. Sometimes there’s there’s kind of irrational reasons in not.
contradicting what you said, but sometimes people have got the wrong belief about a system or whatever. But you know, there could be perfectly rational reasons why a company doesn’t invest in a two year energy saving project. Maybe it makes more sense to spend the money on developing a new product or a bit of marketing. It may make sense. But people tend to assume the people saying no are ignorant or don’t know what they’re talking about. So yeah, that’s important.
Adam Sroka (37:17)
Mm.
And I feel
myself doing it because people all the time say to me again like, why don’t we do this or you should just do that. And they come up with an idea. And like in the vacuum that it was caught with, it is a great idea. And it’s a great, you think you’re really clever. That’s wonderful. But so often I feel the pain of myself saying, but there’s all this other stuff and I can’t, and it’s like, don’t have, I don’t want to explain the whole universe every time and it’s a frustration that I’m not communicating maybe enough of the.
the wider piece for people to get the context. So I can feel myself being that frustrator. And I don’t know, maybe that’s just my life now. Well, Steve, it’s been absolutely amazing speaking to you today. Thank you so much for coming on and talking to us and sharing your insights and things you’ve seen and predict for the energy system to come.
Before I let anyone leave, I always just like to ask if there’s anything you’d like to promote or plug, or if people want to find out more about you or EP group, where should we point them?
Steve Fawkes (38:34)
Well, I think you’ve been kind enough to mention my blog only 11 % dot com. And of course, I have some books. think the best name is just called energy efficiency. And that’s currently available on Amazon in paperback, which finally makes it more affordable. And then in terms of EP group, we have EP group dot com or better still just reach out directly for a conversation. I’m not too hard to find.
Adam Sroka (38:58)
Thank you so much once again and I look forward to perusing the book and the blog and speaking to you again very soon.
Steve Fawkes (39:05)
Okay, thank you, Adam.
Adam Sroka (39:09)
Thank you once again for listening to the Hypercube Energy podcast. As always, if you have any feedback or comments or you want to get involved, please get in touch. And if you want to find out more about what’s happening in data and AI across the energy sector, please join the Beyond Energy community and I look forward to speaking to you soon.
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