If only there were some way of converting into energy the cheerfulness that radiates from Volker Beckers, it could light a thousand houses. When Utility Week meets him at the offices of Albion Community Power, he is on jovial form. He makes jokey conversation with two members of the executive team and a PR adviser, who sit in on the interview. On the gentlest of prompting, he bounds off into an explanation of his journey from the top of a major energy company to championing a renewable energy fund.
His smile droops only slightly at one point, when the questions turn to his former employer’s tax arrangements – but we’ll come back to that.
It is 18 months since Beckers stepped down as chief executive of RWE Npower and he is clearly enjoying the opportunity to dabble in a range of projects, inside and outside the energy sector. These include, as chairman of Albion Community Power (ACP), promoting exactly the kind of small-scale, subsidised generation that has eroded the value of traditional utilities. Indeed, RWE was one of those businesses hardest hit by the renewables bonanza in its home market of Germany.
He explains why he sees community power projects as an important route for investment, albeit starting from a much smaller scale than he was used to. In his three years at the top of Npower, Beckers oversaw investments of £5 billion in energy infrastructure. Today, as chairman of ACP, he is drumming up £100 million for renewables projects.
“Are we getting enough investment?” That is the key question for Beckers. “I believe with this vehicle, it is obviously only a smaller contributor but I think quite an important one because it will create followers, it will create momentum, it will create competition. We can do something in a positive sense and disrupt the market.”
Albion Community Power is a spin-off from Albion Ventures, one of the UK’s largest investors in business start-ups. The board had to set up a separate fund for renewables, as regulations prohibit funds from claiming both the tax breaks enjoyed by venture capital trusts and renewable subsidies. It represents part of a trend for financial players to get involved in energy generation projects and buy in the necessary technical expertise.
The business model “in a way was an accident”, says Beckers. “We are a true start-up business… Creating a bit more disturbance in the market is certainly what we are aiming to do.”
ACP owns and operates brownfield wind turbines, rooftop solar, biogas and run-of-river hydro projects. At the moment, the company sells energy directly to local consumers at a 20 to 30 per cent discount to retail prices, but above the wholesale price. By using a “private wire” it cuts out the middle man and earns a tidy margin. A “Licence Lite” is also on the cards, which would allow the company to sell to other customers through the grid.
As Albion ramps up its investments, RWE and other major energy companies, particularly in Germany, are tightening their belts. Are traditional utilities doomed? “That is an unfair question,” protests Beckers. “ really found it difficult to align its business model to short-term political changes.”
The German situation tends to be characterised as a surge of enthusiasm for community renewables, particularly solar, causing the downfall of conventional power generation. The reality is not quite as simple as that. The financial crisis of 2008, with a little help from energy efficiency initiatives, broke the trend of steadily increasing energy demand for the first time in more than 100 years. Then came the Fukushima nuclear disaster in 2011, triggering a backlash against atomic power. German utilities were also bound by gas contracts that were indexed to the price of oil, which turned out to be a raw deal. “That all came together more or less in one year and that is why I think they now need to look at their business model,” says Beckers.
“As a start-up, you don’t have that legacy,” he adds. “That is why renewables became a no-brainer decision, but we are very mindful that government might change the rules there as well. That is why we are looking at a portfolio of different technologies.”
We look at the fate of some of Npower’s investments during Beckers’ time at the top. There was the Horizon nuclear programme, which it sold to Hitachi. Nuclear is a big investment with very long investment cycles, explains Beckers. “Post-financial crisis, it was very difficult to get funding for.” Npower built Pembroke and Staythorpe power stations, which made a loss last year amid tough conditions for gas-fired generation. “It was the right investment at that point in time… Do we need gas on the system? Absolutely.” Then there was the biomass conversion at Tilbury, which was shut down for six months by a fire and then closed in 2013, having run for less than two years. Further upgrades to extend the power station’s life were cancelled when government said it would not be eligible for subsidy under the incoming regime. “I have to say like many renewables this is where the impact of energy policy shows.”
Does Beckers wish he had invested more in renewables while he managed a sizeable budget at Npower? He disputes the framing of the issue. “We invested by far the vast majority as RWE into renewables.”
Drilling deeper into his motivations for joining ACP, it seems Beckers is not particularly worked up about climate change or enthused by renewables for their own sake. He is more interested in making energy infrastructure acceptable to the public and therefore financially sustainable.
“Any energy investment will have two-digit break-even periods,” says Beckers. “If you are not applying sustainability criteria like climate change, like acceptability with communities, like a successful return for my investors, you do start to struggle after five or ten years.”
Community acceptance (or lack of it) has proved a stumbling block for energy companies developing onshore windfarms, for example. “The perception of the energy business has really deteriorated,” says Beckers. “Therefore many things energy companies have done in the past have not been appreciated or welcomed as much as me and my peers in the industry would have expected… You need to find a business model where you enhance the acceptability of what you are doing.”
Shale gas frackers similarly face local opposition. Beckers thinks they should be allowed to drill test wells, but dismisses the hype around shale. “What I want to have here is a debate which is fact- and evidence-based. Let’s do the test drilling. I don’t believe that the outcome will be that we can enhance acceptability or become commercially viable or competitive with conventional gas, but I am happy to be proven wrong.”
With five minutes to the end of the interview, I raise the touchy subject of Npower’s tax affairs. ACP’s head of marketing interjects: “I really think this is a bit off-track.” It is relevant to Beckers’ concerns about customer acceptability and the industry’s reputation, I suggest. Beckers allows me to finish the question, covering his mouth with his hand thoughtfully before he answers.
The company has been criticised for routeing profits through Malta and paying just £5 million in UK corporation tax between 2009 and 2011. Campaigners at 38 Degrees claimed the arrangement allowed RWE to dodge £108 million owed to the Exchequer. Npower has always denied avoiding tax, insisting it was considered a “low risk” business by HMRC.
The topic resurfaced this year, however, when Beckers was appointed as a non-executive director at HMRC. “A fat cat who helped energy firm Npower’s owners avoid millions of pounds in tax now sits on the board of HM Revenue and Customs – as an adviser to the taxman,” ran a story in the Mirror.
“I am not advising government, I am a non-executive director,” Beckers clarifies. “HMRC is running its own business. I would never respond to allegations at all really.”
Forget the allegations, what about the facts – was the amount of tax Npower paid fair? “This is almost like the question: when did you stop beating up your dog? No-one can define what is fair; we all play to the rules.”
In promoting community energy, Beckers is on safer ground. The Department of Energy and Climate Change estimates up to 3GW of generation could come from community projects in 2020. Beckers does not express a view on whether this is the right level of ambition, but he is clear ACP’s £100 million pipeline is only the beginning: “We don’t want to finish here.”