A tale of two consultancies: the evolution of the Panorama wind report
- 05 Mar 2012, 18:00
- Ros Donald
- KPMG consultant most closely linked to unpublished report
has resigned
- Consultancy that published today's report has substantial
nuclear advisory business
A Swedish energy and infrastructure consultancy has announced
the launch of a report claiming the UK government could save £34
billion and still reach carbon reduction targets - if it invested
less in renewable energy and focused on new nuclear and gas
projects.
The report appears to be based on research which AF-Mercados,
part of Swedish energy and infrastructure consultancy AF Group, originally did in
collaboration with KPMG - one
of the firms that advises the government on energy matters.
In November, an unpublished KPMG report with the same headline
conclusion was trailed in the press, but never released. KPMG
subsequently distanced itself from the draft findings. We have
learned today that the KPMG consultant most closely involved with
that report has since resigned.
Both consultancies are pretty serious players in the energy
sector - so why did they take such different directions in their
treatment of this study?
The study
AF-Mercados said in the Sunday Times yesterday
that it was going to release the report today under the title
Powerful Targets - although we have not yet seen it published
independently.
The report puts forward three scenarios for the future of the UK
energy sector, exploring different options for cutting carbon
emissions. The one AF highlights would, it says, meet the UK's target
of cutting CO2 emissions by 34 per cent of 1990 levels by 2020 -
but not a pledge to increase renewable energy use.
The report appears to be based on work the consultancy completed
with KPMG last year for an report titled Thinking about the
Affordable, which remains unpublished. A KPMG spokesperson
confirmed to Carbon Brief that this was initially a joint project
with AF, although the Sunday Times suggests that KPMG commissioned
AF to carry out the work.
The KPMG report became controversial even in its draft form. The
BBC's Panorama programme, What's really fuelling energy bills in
Britain?, cited the
same £34 billion figure as AF led with today. The
programme came in for criticism for relying on the unpublished
report, which KPMG subsequently decided to
abandon.
KPMG's turnaround and the resignation of Mark
Powell
KPMG walked away from the study in February
because, it said, the findings were too susceptible to
misinterpretation. "The assumptions and parameters used in the
model produced large swings in the financial outcomes", it told the
press.
Today, a KPMG spokesperson told Carbon Brief that the KPMG
partner responsible for the report, head of power and utilities
Mark Powell, left the consultancy voluntarily some time after
November last year when the study was originally due to be
released.
In the press release for the original report, Powell was quoted
saying:
"Taking a clinical, economist's view of
hitting our carbon reduction targets for the least cost shows that
we can reach our goal for less - a lot less. However, in
order to do this, the most expensive forms of renewable energies -
particularly offshore wind - need to be scaled back in the
generation mix."
AF consult - an "independent perspective"?
The Sunday Times article suggests KPMG was scared off publishing
the report due to pressure from wind groups who saw leaked copies
of the report. It quotes AF Consult, in contrast, saying that it
wanted to:
"publish the analysis in the interests
of presenting an 'independent' perspective in a debate 'led by
groups with vested interests'."
In response to media requests for information about who
funded the work, AF has said it received no third-party backing. It
has not personally responded to our requests for comment.
It's worth bearing in mind, however, that AF-Mercados's parent
company AF Group is a Swedish-based consulting firm that advises on
industrial processes, infrastructure projects and IT. AF has
extensive energy operations in the energy sector and particularly
in advising on nuclear facilities. According to AF Group's annual
report:
"[AF's] Energy Division offers technical
consulting services for the energy sector. It has operations in
many areas of the world, and is a market leader in the Nordic
region, Switzerland and the Baltic countries. It enjoys a strong
standing in various fields of expertise, particularly nuclear
power, where it is a world leader among independent consulting
companies."
2011 was not the best of years for AF's energy division. "The
accident at one of Japan's nuclear power plants and the increasing
strength of the Swiss franc had a significant impact on the
division's earnings," the annual report says. AF Group's interest
in the nuclear industry - which AF-Mercados fails to mention in the
report - might put the findings of the report in a new light.
Discussing the report's findings
The UK's Department for Energy and Climate Change (DECC) has
responded robustly to the report, saying there are several problems
with its findings, and that the "report's assumptions are so flawed
the conclusions are near pointless."
We had a look at the scenario AF is pushing - scenario two - and
it relies on several assumptions, as DECC have also noted in a
blog post. Notable among these is that the scenario relies on
heavily ramping up new nuclear builds. "In this scenario over 20 GW
of new nuclear is built by 2030, and nearly 40 GW by 2050," the
report says.
Scenario two may be cheap, but it suggests that the UK should
focus on just two fuel sources, gas and nuclear, rather than
diversifying supply to cope with relevant (and hardly impossible)
unknowns like rising gas prices or delayed nuclear build.
Anyway, by this point the findings of the report have taken a back
seat to the increasingly convoluted circumstances surrounding its
release.