Leader – National Grid: if it ain’t broke, why try to fix it?

Utility Week acting editor Jane Gray responds to calls for an overhaul of the system operator.

The revolution has started! Out with the old, in with the new and down with the establishment! This was pretty much the tone of the Environment and Climate Change Committee’s recommendation that an independent system operator be appointed “as soon as possible” and in spite of considerable cautionary advice to the contrary from industry experts (p4).

The scope for conflicts of interest between National Grid’s wide-ranging roles in the energy system – from system operator to interconnection owner and capacity market administrator – is “intractable and growing” says the ECCC. This is a worry because it could dilute progress on low-carbon networks by letting Grid engage in “asset padding” and the promotion of capital-heavy capacity providers like interconnectors over and above novel sources like DSR.

Experienced representatives at National Grid seem somewhat baffled by the ECCC’s convictions in this arena and question the evidence on which they are based. Although they admit the theoretical scope for such conflicts, they point to a variety of internal measures designed to prevent them from becoming manifest, as well as external factors that discourage them. For instance, totex accounting discourages asset padding, they say.

Furthermore, Grid has pointed to the conclusions of an independent review of its SO role carried out by the National Infrastructure Commission earlier this year. There is “no evidence that the system operator has acted in a way which has negatively affected consumers”, said the resulting report.

There’s no doubt that there’s significant change afoot in the UK’s energy system and, over time, this will necessarily change the shape of the system operator – something that Grid is actively exploring with Ofgem today.

However, pushing for a radical change to this fundamental system function too soon would likely create far more problems than those the ECCC sees in the status quo. It would be extremely costly, could lead to the loss of invaluable expertise and would cast a dark cloud of uncertainty over the stability of system operation, just at a time when new technologies and market participants must be sure of the framework within which they are innovating.

Cynics have speculated that the ECCC’s recommendation amounts to rabble rousing. It’s unhelpful when the system is already in metamorphosis, they say.