As towns and cities across the UK work to “build back better”, they now have a vital opportunity to make strategic investments for long-term economic growth.
For many the message is clear: the move to a low-carbon economy is as vital to future social and economic success as it is to the climate.
What real progress is being made on the ground? And how do communities stand to gain from the energy transition?
Glasgow is one city that is alive to the long-term opportunity. The progress it is making to transform its economy, decarbonise and manage the Levelling Up agenda serves as an example of how the energy transition can generate place-based prosperity.
In this audio feature, Megan Wright, Senior Editor at Longitude, speaks to three thought leaders at the forefront of Glasgow’s energy transition:
- Kit England, Green Economy Manager (Glasgow City Region) at Glasgow City Council
- Guy Jefferson, COO of SP Energy Networks
- Jim Coleman, Director – Head of Economics at WSP
Together, their insights illustrate how cities around the world can harness the shift to net zero for the good of the environment, the economy and society.
Transcript
VO: This audio interview is part of WSP's campaign on creating place-based prosperity in the UK through the energy transition.
It is produced by Longitude, a Financial Times company, in partnership with WSP.
Megan Wright:
Glasgow. The largest city in Scotland and home to COP26.
It’s a city that has been cast into the global spotlight for its efforts in the transition to Net Zero.
And, in light of the UK’s new energy security strategy - which sets out ambitious goals for the transition to a low-carbon energy economy - Glasgow’s efforts could prove to be a timely example of the path that lies ahead for the UK - and the world.
Megan Wright:
So, what progress is being made on the ground?
And how do communities stand to gain from the energy transition?
I’m Megan Wright, senior editor at Longitude, join me as we explore how Glasgow is harnessing the energy transition to drive economic growth, and what can others learn from this example of place-based prosperity.
[section 1: A new opportunity for Glasgow: Levelling up and the energy transition]
Kit England:
In Glasgow, we have 19,100 businesses working in the economy. All of those need to go on that journey and they need to go on that journey very, very quickly. There's going to be some challenges for us to think about, which is how do you fund and provision that, which is of a scale of support that's not normally associated with the support that we offer in more traditional business support engagements.
Megan Wright:
That’s Kit England speaking. He’s the Green Economy Manager for the Glasgow City Region at Glasgow City Council.
From new investment to job creation - Kit says the transition to a post-carbon economy holds a number of opportunities for social and economic prosperity.
Kit England:
It's a bit of a double-edged sword. There are some significant opportunities, but they need the appropriate support to make sure they're realised. We employ a significant number of individuals in the energy sector at the moment, particularly in electricity and gas transmission and distribution. And obviously that industry is going through a huge change right now. That's a massive opportunity for us, but there are also opportunities across the board in terms of investments in nature-based solutions, investments in sustainable transport.
Megan Wright:
But the shift from policy to action will take combined effort:
Kit England:
In terms of infrastructure investment, for example, Scottish Power Energy Networks investment in the grid decarbonization is driving big change. So in the run up to COP, they announced 13 million of extra investment in substations across the city. And that's important, because it unlocks lots of different change. For example, one of them was to make sure we had the appropriate capacity to host the COP talks, which is pretty important. But actually the other was to upgrade the substation near first bus, their Caledonia depot. And that is so that they can then invest in their fleets to make sure that we've got electric buses that are running across and serving the city.
Megan Wright:
Indeed, many of Glasgow’s businesses are alive to this opportunity.
Guy Jefferson:
My name's Guy Jefferson. I'm the chief operating officer for SP Energy Networks, which is a subsidy of the Scottish Power Group in the UK and Iberdrola Group Worldwide.
So we have a contract, if you like, with government. A five year business plan that we agree with Ofgem, and we are partway through that at the moment. And it's been unusual. For the first time ever, I feel like Ofgem have allowed us to come forward with extra projects, out with the scope of our existing contract, on the basis that they drive the green economy and sustainable projects. So we were able to put forward, as a business, £50 million worth of projects which are shovel ready and all brought forward by stakeholders across our patch, including Glasgow.
Megan Wright:
So what’s the challenge now? Ensuring that Glasgow’s infrastructure can keep pace with the demands of a green economy.
Guy Jefferson:
Our worst nightmare is that all of a sudden the vectors all align and we have thousands, tens of thousands, hundreds of thousands customers who want to have an electric vehicle. They want have somewhere to charge it. They want to have heat pumps in their home because they're becoming more economic and we don't want to be in a place where that happens all of a sudden, and we haven't done the work up front to allow people just to implement those technologies without worrying whether the electricity will be there to fire them.
Megan Wright:
And with the UK Government’s sights set firmly on Net Zero, the clock to solve these challenges is ticking.
By 2030, for instance, the UK is targeting a 95% low-carbon electricity mix.
In parallel the government’s Levelling Up agenda paints an ambitious picture of economic growth, productivity, and skills and technology transfer, all with the aim of reducing economic disparity.
As part of this agenda, it has pledged £26bn of public capital investment for the transition to Net Zero. That’s matched by a further £90bn from the private sector by 2030.
So, is greater alignment between these two strategies the only way to a net zero economy? And what does it mean for both public and private sectors?
Jim Coleman:
I think we've had a couple of decades where I think here in the UK we've tried to separate government and business and government's job is just to let business do what it needs to do: “The market will be efficient and solve everything”. Markets are never efficient, so they can't solve everything. Government does need to intervene. And net zero, that's not a market phenomenon. The market will not solve net zero. That's a climate related societal issue.
Megan Wright:
Meet Jim Coleman, head of economics at WSP.
Jim is a firm believer that the UK Government’s plans to address economic inequality must align with its Net Zero strategy.
He recently published an article on this very topic, titled: If levelling up is to work, then it must meet the needs of a green economy.
Jim Coleman:
Levelling Up is all about trying to ensure that those parts of the country which are performing economically behind the national average and certainly behind the average of the best performing and parts of the country to try and bring those parts of the economy up to, and beyond the average so that they increase their performance and their contribution to the overall economy.
It's not a new thing. These kind of sub-regional and regional economic disparities have been around for a long, long time. Certainly since the economy deindustrialized in the 70s and early 80s. It's not a new thing. But Levelling Up is kind of a new label for how we might tackle it.
And the way to do that of course is to make sure that those areas of the country are fully engaged with this net zero process that can generate all of these new economic opportunities.
But the other part is really kind of on the supply side, making sure that if those investments do come in in net zero technologies, for example, in those kind of decarbonization industries, that the benefits will flow to those locations. And that the workforce will come from those locations, the skills development opportunities flow into those communities.
Megan Wright:
Do you think it's realistic or achievable to be setting our sites on this green economy as we work to level up?
Jim Coleman:
There’s no alternative really. There's no choice. It's a necessity because if we don't do that, then we just store up further problems for the future and we make our economy less resilient. It's an absolute imperative. And the opportunities are there, the opportunities to create new types of economic activity, new jobs, new skills, development opportunities, new technologies, the opportunities are there. And we are realising some of those opportunities already.
[section 2: The road to a green economy: Innovating through collaboration and building a future fit talent pipeline]
Megan Wright:
As the energy transition gains traction, Glasgow’s public and private sectors are collaborating on innovative ways to create place-based economic prosperity.
Guy Jefferson explains.
Guy Jefferson:
We set up a green economy hub, under Sustainable Glasgow, which is the kind of governance Glasgow City have put in place as part of their sustainability programme. So within that we put a green economy hub together, which is a number of businesses across different sectors of the business community, which I chair. And we pulled together a charter, which we've all signed onto. We've got over 30 organisation signatures, so not just businesses. So NHS Glasgow, for example, are a signatory to it, as well as businesses in Glasgow.
Having a net zero commitment in the future is one of the things, to make sure they provide leadership. And Net Zero is another commitment within the charter to decarbonize their transport fleet over a period of time as part of the charter. To encourage sustainability in food, for example, is part of the charter. So there's a whole range of different things. And if anybody's interested in seeing that charter, it's on the sustainable Glasgow website and if they've got a Glasgow business, they're welcome to sign up. But through that medium, we're able to encourage businesses to do the right thing, and we're able to work together and share our best practise alongside those commitments. So you see that kind of community getting together now, it's really quite encouraging.
Megan Wright:
But having a champion is also critical.
Guy Jefferson:
You need a facilitator. I think having the capacity and capability within the city is absolutely essential. And that would also allow them to build their projects, so they're more investible. A lot of the projects are great projects. They look good. People can get enthused by them in terms of what they're likely to bring to the city, but they're just not at that investible stage. They're not likely to in an actual investor to invest in them because they haven't got it to that level. So I think that's a bit of a gap at the moment. And again, not only that, but the delivery vehicle within the city to allow that to kind of move on and start to happen.
Megan Wright:
For Glasgow, this means the right people working together to ensure the city meets its climate targets - all while promoting social and economic gains.
Kit England again….
Kit England:
I think for a lot of people, and I include myself in that, it can feel quite hard to step into the space of saying this is actually what needs to be done, because the gap is so big. But actually, once you ... we are very fortunate. We've had very strong political leadership here in Glasgow that have said this is where we need to go. And actually once you can step into that space, then that's really helpful, because all of your assumptions change.
I think what's coming over the horizon though, is the approach that we're going to have to take is going to have to change quite significantly. We always have worked with the willing and that's what we need to do. But actually there's a big change coming in terms of the regulations and the thinking around green economy more generally.
So from this year, all businesses that are over I think it's 250 employees are going to be covered by what they call the sustainability disclosure regulations. So every business of that size or beyond will have to disclose how compatible its business model is, both with the transition to net zero and the impacts of climate change.
But then on the skills side, we've been working in partnership with Skills Development Scotland on the creation of a regional just transition skills action plan. And so that's been about thinking through what are the changes to the skills system that are needed. And how do we join up the conversations between the climate planning, which sort of sits over in one place, where there are assumptions about the types of projects and technologies that you're going to bring forward, for example on housing retrofit.
And on the other side of that, what is the skill system preparing for, in terms of adult education, adult learning, kind of higher education. Those conversations haven't really been joined up before, so there's a lot of assumptions that we will be doing delivering large scale infrastructure investment, but actually we haven't really started to have those conversations about making sure we have the right supply of labour with people with the right skills and knowledge and experience to make it happen as well.
Megan Wright:
In fact, one of the biggest opportunities for the green economy is the demand for talent and new skills.
Scottish Renewables research shows that every GW of renewable electricity installed in Scotland creates approx. 1,500 jobs.
Meanwhile PwC’s Green Jobs Barometer estimates that each new green job in the energy sector generates a further six jobs in the economy as a whole.
So how are Glasgow’s organisations approaching this? And what are some of the mutual benefits to be gained here?
WSP’s Jim Coleman explains…
Jim Coleman:
We've also got a large cohort of the population that we'll need to transition from industries which are not going to need so many people into some of these new green industries. We’re seeing big changes in the retail sector, for example. Recent retail is not employing the same number of people that it used to in the past because of changes in technology, because of changes in our behaviour. And people in that sector of all ages, all backgrounds could usefully perhaps transition into some of these new opportunities, but that takes quite a lot of work. It takes a lot of effort on the part of us as individuals.
But also training organisations, FE sector, HE sector need to not just train up young people, they also need to help with this process of transitioning people across different sectors of the economy really. And again, I don't think we're quite there with how that can be programmed in a kind of consistent future facing way. I think it's really complicated by the fact that we have lots of definitional issues about what constitutes a green job or a zero-carbon job, or a green industry, a zero-carbon industry, lots of definitional industry, lots of definitional challenges.
Megan Wright:
And, as technologies continue to evolve at pace, ensuring education and skills are adaptable could prove make or break across all sectors of the economy.
Jim Coleman:
The technologies just keep changing. So the skills requirements change and the definition of things changes. And a lot of training and education is very tied to fairly standard categorisations of things and fairly standard models of teaching and training. And they're not really flexible enough to respond to a situation which is very fluid and where things come on stream quickly and things disappear very quickly. And we need to try and think about how all of that's going to work.
[section 3: From Glasgow to the world: Lessons in place based economic prosperity]
Megan Wright:
New jobs, new skills, new technology and new opportunities.
When it comes to place-based economic prosperity - the benefits are clear. The bigger question now is how to de-risk projects and technologies to facilitate the necessary growth.
Jim Coleman again.
Jim Coleman:
One of the big questions with everything in economic development of course is funding and money. Where does money come from? And I think we've got a really interesting situation when we look at kind of decarbonization and green economy, green technologies, because there is a lot of money out there which could flow in from different private funds, different sources of investment, climate finance, green finance, a lot of really interesting sources of funding out there.
But the funding needs to find its way into projects which are seen as viable, investible, bankable projects.
And I don't think that's quite been fully worked through yet, how that process can work, how the public sector government sector enables an accelerated flow of private finance into projects. Because we're talking about things which are still relatively high risk and any investor has got to make a return on investment possibly to pay shareholder dividends. And of course they're looking for relatively good return on investment and fairly de-risked projects.
Net zero is not a world of de-risked projects. It's a world of innovation and actually a relatively high degree of risk. And again, we've got no choice really, but to get involved in that.
Megan Wright:
And for other cities, regions and countries? Well, there are plenty of lessons that Glasgow has to offer, says Kit England.
Kit England:
As firms start to really get to grip with what the transition to net zero means for their business models and the financial risks associated with that, then we are going to have to make sure that we have a much more ongoing engagement with those firms that we support them so that they're able to stay and they're able to prosper in Glasgow, rather than thinking about going elsewhere or whatever.
There are areas we’d like to go further on, energy efficiency is a really big one where we need to be doing much more. But I think it's not about the policy ambitions. I think there are some really challenging pieces in the regulatory space in each of those different issues. On energy efficiency, you've got big challenges around things like the principal agent problem, where actually landlords are unlikely to invest in their properties because the tenants pick up the benefits. So it's those kinds of challenges where we really need to dig a little bit deeper and work through those if we want to get to delivery at scale.
So it's not so much about are we going in the right direction, are we going quick enough, but it's now about the how we are working through those issues and having that dialogue, and I think that's going to be really important to make sure that everyone in the UK can play their role.
Megan Wright:
Happily for Glasgow, the proof is in the pudding, says Guy Jefferson.
Guy Jefferson:
I would say nothing is more effective than an actual project. An actual delivery of something tangible. So I think we've seen a number of projects now where we've come together, both ourselves with Glasgow City Council and other partners and they're starting to deliver real projects on the ground. The scale's not big enough yet, but it's showing it can be done. And it's just a matter of taking the learnings from each of those projects and building the scale.
And that's what will attract people in. As you say, people are always looking for best examples and best practice. So if they see that, then it will bring other investors in, which will also allow us to get these projects up to scale. So, work together as a community, whether that be business, public-private, and also make sure that you're delivering projects from the start, so we can start to build on that experience and start to move up to scale.
Megan Wright:
Job creation, skills growth, technology expansion and economic prosperity.
The move to a low-carbon economy offers so many opportunities beyond environmental and climate wins.
Glasgow’s successes - as well as the hurdles it’s working to overcome - offer powerful lessons in place-based prosperity.
I’m Megan Wright. Thanks for listening.
VO: This audio interview is part of WSP's campaign on creating place-based prosperity in the UK through the energy transition.
It is produced by Longitude, a Financial Times company, in partnership with WSP.
