Josh Buckland gave evidence.

Good afternoon. We will now hear oral evidence from Josh Buckland, a partner at Flint Global. For this session, we have until 3.10 pm. Mr Buckland, will you identify yourself for the purposes of the record, please?

Josh Buckland:

I am Joshua Buckland, a partner at Flint Global.

Q Thank you very much for joining us, Mr Buckland. Obviously you come from the perspective of a company that is investing—alongside others that are investing—in the future technologies that will guide us towards net zero and a clean future. One of the objects of Great British Energy, as clause 3 states, is that it should be involved in

“the production, distribution, storage and supply of clean energy”.

Do you see the Bill and the creation of GBE as an assistance in unlocking private capital and the investment that we need in the new technologies, or are you worried, as some are, that this might be a blockage and get in the way of the private sector?

Josh Buckland:

I think that that is the right question to ask. Ultimately, the amount of capital we need to invest in the energy transition is so significant that we will have to deploy and leverage in private finance at a scale that has not really been seen before, and any intervention from Government needs to play a role in unlocking that private capital. The Government have set out that Great British Energy will be mobilised with £8.3 billion of public capital. On the surface, that is a significant amount of money, but in comparison with the hundreds of billions that we will need to deploy through the overall transition, the way that it crowds in greater levels of private investment will be the key test of its success.

The Bill sets out a range of roles that Great British Energy could play, some of which could have a bigger impact on mobilising capital than others, and a range of different mechanisms that it could deploy. It is probably too early to tell whether the structure and the decisions it makes will mobilise capital at the scale that the Government intend, but the framework set out in the Bill will definitely give it the potential to do so.

I am interested to know whether there are any conditions that you would like to see put on the financial assistance provisions and their scope under clause 4, given your unique placement within the systemQ .

Josh Buckland:

The financial assistance statements set out in clause 4 are relatively broad; they give Great British Energy the ability to invest in a variety of ways. It comes back to the question of how you create value through Great British Energy. One of the key tests will be whether it can drive additionality, so whether it can deploy capital in a way the private sector cannot. That usually rests on two issues. One is whether it can invest earlier in the development curve when private investment at scale is tricky, so where there is technology risk or development risk. An alternative is whether it can invest on a sub-par basis, so effectively whether it can create catalytic capital—that is the terminology often used—in a way the private sector would not be able to.

Clause 4 could potentially do those things, and there is no restriction on its ability to do them, but obviously the Government have not yet said much about exactly what format these investments will take. That is not necessarily an issue from a legislative perspective. I have looked back at the legislation that underpinned the UK Infrastructure Bank and the Green Investment Bank, which I was involved with when I was in government, and both those Acts are relatively high-level in terms of the interventions and mechanisms that they can deploy. On the surface, there is nothing that restricts that. As the Government think about the deployment of Great British Energy, I imagine that they will want to set out how it will give more clarity to the private market on the sorts of interventions and mechanisms that it will look to deploy at scale.

Q Is there anything that you feel is missing from the Bill that would provide clarity, or do you think it will be covered in subsequent documentation?

Josh Buckland:

My personal view on financial assistance is that it is fine to keep it relatively broad. Having been a civil servant in government for a long time, I know that primary legislation, if it is relatively broad, gives you the ability to think commercially, and clearly the energy transition will be set out with a range of different technologies. Innovation will come through, and the ability for the Bill to be flexible will assist that.

There are other questions about things that are referenced less in the Bill—let’s put it that way. In some of the previous legislation—for example, the Enterprise and Regulatory Reform Act 2013, which set out the Green Investment Bank—the Government talked about the need for operational independence undertakings and gave more clarity on the importance of creating an independent institution that can act in a way that ensures it can partner with the private sector and can take investment decisions that mobilise private investment and do not distort the market. Although that is not necessarily linked to clause 4, there are some interesting questions around whether the independence framework set out goes far enough to give that reassurance to the private market.

Q The Bill, as we have discussed, is pretty light on detail at the moment, which means it could be all things to all people or not offer enough answers to give any reassurance to anyone. From your clients’ point of view, is there a different mechanism that they would prefer? How could this public investment be used in a different manner to actually help drive and retain the private investment coming in at the moment? In other words, is this the best mechanism for keeping and driving investment?

Josh Buckland:

On the surface, a range of different countries have publicly owned energy companies of different sizes and scales. Therefore, I do not agree with the concept that private investors are either unfamiliar or concerned at a general level. It will all come down to your point around the design of the actual institution and how it operates with the private market.

I think you are right to say that the Bill is relatively high-level. Looking back at some of the precedents that exist, I would mention the Green Investment Bank again. That was operational for a number of years and was established and grown while the legislation was then taken later down the line. It was easier, if you were a private investor, to understand the role that the Green Investment Bank would play and then have the legislation to effectively inform and solidify that.

The challenge in this context is that the Government have obviously proceeded with the legislation early on, as the institution is being established. That does not mean to say that it cannot be created as an institution that is independent and galvanises private investment but, clearly, the current level of uncertainty around the design and the mechanisms that it will deploy will add to that challenge.

Therefore, the Government have said that alongside the Bill they will look to publish more detail on a framework agreement with Government, and how they will set that out and consult with private industry. That, in tandem with the Bill, is critical at this formation stage. That is not to say that it necessarily leads to all that detail being in the Bill itself, but it is critical that it goes alongside it.

ItQ is good to hear you say that the Bill has the full range of mechanisms within it to mobilise capital. There has been a recurring theme today that the Bill should provide flexibility for future eventualities as the energy system changes dynamically. Do you have any reflections on the past 10 years, and looking ahead to the next 10 years, as to how the mechanisms that get chosen by the executive at GB Energy might have changed had it been in existence 10 years ago? Looking ahead as well, how might the mechanisms that it chooses change over time?

Josh Buckland:

It is a fair and good question. I think your substantive point is absolutely right; the mechanisms set out under clause 4 give Great British Energy the opportunity to take different approaches as technology shifts and changes. We have definitely seen, over the past decade, a shift towards different mechanisms deployed by Government. At the early stage, they were largely bilateral, non-competitive and largely done on a kind of long-term contract basis. It is very instructive to look at what the UK Infrastructure Bank is now doing; it is now looking at different mechanisms—earlier stage investment, development capital at risk, and equity investments. Those are the sorts of things that Governments have not traditionally done at the scale that is necessarily required for the energy transition but that obviously Great British Energy could play a role in extending.

There is an interesting question around where you draw the line between Great British Energy and the role of other existing institutions. The Government have already talked about the fact that they are going to evolve the UK Infrastructure Bank to be the national wealth fund, and obviously that will have some crossover with the operations and focus areas of Great British Energy. For me—this may be an issue that is separate from the Bill—how the Government set out how the governance will work between the Department, the Government, Great British Energy, the national wealth fund and other institutions will be critical to making that a success over time, as the executive of Great British Energy looks at new issues and technologies as they come through.

I would stress—I imagine that this point may be made by other witnesses—that the fact that clause 3 is relatively broad, in terms of the sectors and areas that the entity can invest in, is really beneficial, because that also allows some level of independence for the executive to take choices as the energy sector evolves. Clearly, we know the many technologies that we have now, but there will be a range of different issues that come through. I therefore think that that flexibility under clause 3 is quite important.

FollowingQ on from what you were saying about uncertainties, and how we have the Bill but then there are all sorts of other questions, it is about creating certainties for us as legislators, to some extent, as well as for investors. Clause 5 says that

“the Secretary of State must prepare a statement of strategic priorities”.

Do you think that it would be important to have a timescale for that, so that we know when the Secretary of State is preparing the strategic priorities, and so that it happens quite quickly? That is something that we can do: put a possible time limit or timeframe into this Bill.

Josh Buckland:

That is a very good question; I look back to my time as a civil servant. Sometimes timelines can be very useful because they give clarity, externally, as to when priorities will be updated and when there will be new interventions from Government, but sometimes they do not necessarily reflect the external environment as things change. If there were to be a decision to include an additional requirement around the timeframe, I think you would still want the ability to respond to external events as the world changes, to ensure that the priorities set out to the institution could adapt as the external world changes. Obviously, that is very true in the energy transition.

Clause 5(8) states that Great British Energy must have the ability

“to publish and act in accordance with” that statement. The thing for me—again, it may not be an issue for the Bill itself, but it will be interesting to watch—will be how bound Great British Energy is to the specifics of the Secretary of State’s statement and what latitude it has beyond that, because clearly it will want to take its own commercial decisions. Fundamental to its independence and ability to crowd in private finance will be that it is taking commercial decisions with strong justification. That is an area that may not need any greater clarity in the Bill, but it will be one thing that private investors will look at quite closely.

Q Thank you, Josh. Prior to becoming an MP, I worked globally to advance climate action, so I know that there is best practice to learn from countries around the world. As a global corporation, have you seen comparable frameworks in other countries to support the transition?

Josh Buckland:

Completely. There are plenty of precedents in various sizes and scales. Critically, they are not necessarily all in the concept of a developer company, which obviously has got most of the attention as a result of the Great British Energy Bill. There are those examples, and there are significant European energy developers and national energy companies right across the world, and quite often they partner with other entities, whether they are private investors or developers. It is welcome that in the broader statement the Government have been clear that, especially at an early stage, they want Great British Energy to partner with other developers. We should not forget that we have a lot of leading companies in this country, both headquartered here and inward investors.

The other interesting area is the role that the state can play more generally. I might be wrong, but I think that is alluded to in clause 4, which mentions that the financial assistance may be applied “pursuant to a contract”. That is an interesting dynamic. In Denmark, for example, the state in its new leasing process for offshore wind will take a 20% stake in projects as it offers out contracts to the private sector. That is an interesting model that could potentially be applied here and has been applied in other European jurisdictions.

I am not entirely sure about the Government’s intentions on whether that would be a matter for GB Energy or for broader policy, but clearly it creates different opportunities. We should not necessarily think about Great British Energy just as an investor of capital, to go back to the question asked earlier; this is a significant amount of money but, given the scale of investment required, it will be deploying other capital through it that is the key test of success.

I call Stephen Flynn.

My question has just been answered.

Q My question is along similar lines. Thinking about attracting that capital investment, we are currently in a scenario where, in relation to clause 4, there is a need to de-risk some UK energy projects to unlock additional capital investment. Can you describe how you see the specific role of GB Energy in unlocking some of that capital investment?

Josh Buckland:

I have looked through the project life cycle, and clause 4 gives a lot of flexibility around it. There is the early-stage development capital, which is quite difficult at this stage to develop at the scale required. Developing large-scale energy projects costs not just tens of millions, but potentially hundreds of millions through the development phase, so there is a role there that GB Energy could play in the deployment of development capital.

Potentially more important in a development phase is the ability to help projects to de-risk other things that they cannot control, such as their ability to access a grid connection, to get planning approval and to access the right supply chain domestically, to go back to the point about unlocking economic potential here. That could potentially be a significant role for GB Energy. That comes back to the governance question of where Government draw the line between a role for Great British Energy and the Government, because a lot of those issues are effectively for the Government to deal with, but that is an interesting dynamic to watch.

If we move through to the construction phase, there is slightly less of a role, in truth, because the level of capital required in building out projects once they have got over the initial financing barrier is potentially lower. I know the Government have talked a lot about that separately from the Bill. The exception is local and community energy projects, where clearly the barrier to unlocking investment is higher, and there is potentially a role there for Great British Energy that the Government have talked about.

The final piece is whether, once an asset has been built out and is operational, Great British Energy should have a role there. Again, that is potentially more a question about how you want the capital to be deployed. The Government could take a stake in a project, or invest to then seek a return, and utilise that money either to reduce energy bills or to reinvest. That is a question around prioritisation of public spending, because that might be a sensible thing to do, but there is a range of other things you could invest in that might look beyond the energy transition. Hopefully that gives you a bit of a feel. The role will definitely change depending on where you are in the asset life cycle.

Q Given your history as a civil servant and in government over the last years, one of the issues around governance under clause 5 was the level of scope and power given to the Secretary of State, without a review, being able to review, reverse or replace the statement. Given that in the past we have had the rolling back of commitments and that we are trying to create certainty for investment, do you have any reflections on whether there should be any kind of review before the Secretary of State can do anything? We are being asked to support this Bill’s being so broad and flexible that any change would be quite substantive. Is there any learning from the past where you would change the way that is described in the Bill?

Josh Buckland:

There is a question around consultative processes, I suppose. One thing we have seen, or that I have experienced, especially on the planning side, is that when the Government set out statements of intent—for example, through the planning regime and national policy statements—it is important to consult on those extensively in advance so that there is certainty around what they mean. Then they have to wait as institutions respond. There may be a question about what level of external input is given before the statement of strategic priorities is set out, or whether it is just a Government statement that is then passed through. There is an interesting question about consultation in advance.

Once it is established, those acting and investing alongside Great British Energy will be more interested in how it as an institution interprets that statement. If it has to set out a strategic business plan as set out under subsection (8), that is the area that companies will be more interested in, because—assuming it is operationally independent—that is the thing that they will take more seriously.

The other dynamic in terms of updates is the risk that regular updates to the strategic plan create uncertainty. That might go back to the question of timeline and expectations of when the statement is reviewed, when it is republished and at what stage, and what needs to change externally to make that a reality. That is probably an important dynamic. Whether that is a matter for the Bill I will leave to others to guide on, but obviously it is an area that will be of interest externally in understanding how Great British Energy operates in practice.

Most of my professional background has been in workforce development in supply chains, ensuring that we can deliver. Even though we have had the conversation about the flexibility and the broadness of the objectives, I think this is still an ambitious piece of legislation that the Government are putting forward. I am interested in your reflections on the objectives and the financial assistance, and whether you think that in the country we currently have the supply chain or the skills to deliver on this ambition, or whether the Bill itself in containing these powers will be a catalyst to deliver on that ambition.Q

Josh Buckland:

Ultimately, the question of supply chain is broader than this Bill. Great British Energy could absolutely play a role, especially if it is doing place-based investments or is particularly investing in certain projects. but there is a fundamental question for the Government, as they look to build out the supply chain, around what they are doing at a skills-based level, what they are doing at a technology development level and how they are giving greater clarity on the pipeline of projects over time, some of which might be invested in by Great British Energy and some of which might not. For me, supply chain and skills deployment is a matter of broader Government policy, which Great British Energy can support.

As we stand here today, we do not necessarily have the right level of skilled capacity in the country to deliver all the ambitions that have been set out across infrastructure. It is important not just to look at the energy sector; a lot of the changes will require changes in the transport sector, the water sector and others, but that does not mean that we cannot have those skills if there is a broader framework to develop them, to train and to invest at scale in the supply chain. Great British Energy could play some role in that, but the broader policy framework and the Government’s ambitions more widely will dictate that to a greater degree.

Thank you very much indeed for your time this afternoon, Mr Buckland. The Committee is indebted to you.