National Grid calls for offshore electricity network

The head of National Grid has called for an offshore electricity network to be built in the North Sea to help support a green recovery from the coronavirus lockdown and achieve the government’s ambitions of deploying 40GW of offshore wind by 2030.

Chief executive John Pettigrew said anticipatory investments to facilitate the rollout of electricity vehicle charging infrastructure could also provide an economic stimulus in the wake of the pandemic.

Pettigrew was speaking to Utility Week as National Grid released its financial results for 2019/20, which showed operating profits across the group down 3 per cent to £2.78 billion, underlying operating profits up 1 per cent to £3.45 billion and pre-tax profits down 5 per cent to £1.75 billion. The company grew its regulatory asset value in the UK by 4 per cent to £20.4 billion and reported a return on equity of 12.4 per cent.

National Grid said it expects the novel coronavirus to reduce its underlying operating profits for the next financial year by £400 million, although only £40 million of this relates to its operations in the UK.

Earlier this week, Ofgem chief executive Jonathan Brearley sent an open letter to network operators instructing them restart any work they suspended for the lockdown that does not conflict with the current social distancing guidelines and to begin catching up “at pace”.

Pettigrew said he expects most, if not all, of National Grid’s backlog to be completed by the end of the new financial year: “Our expectation is actually we’re going to spend a similar amount of capex in the UK as we spent last year… As we lift the restrictions and as new working practices have been put in place, I’m comfortable that we can meet our obligations going forward.”

He continued: “At the beginning of April, we took a pause on our large maintenance and capital projects and worked out how we were going to be able to deliver that safely so we can protect the wellbeing and safety of our teams. We saw a slight delay in April as we worked through that with our supply chain. Actually, the vast majority of that work is now being reinitiated.”

Pettigrew also highlighted the potential for network companies to contribute towards the post-pandemic recovery. He said National Grid’s business plans for RIIO2, submitted to Ofgem in December, included spending of £7.5 billion on electricity transmission and £2.5 billion on gas transmission, but that the group has identified another £3 billion of investment that could made to support the UK’s decarbonisation efforts.

“These are multi-year projects but there are opportunities to initiate these projects sooner if we get the regulation and the policy right,” said Pettigrew. “Just as an example, you’ll recall from the budget that the government supported the creation of an ultra-fast charging network and put £500 million aside.

“OLEV [the Office for Low Emissions Vehicles] are working through that at the moment, but we believe there’s an opportunity to get some of those connections moving quite quickly – not just with National Grid at the transmission level but also at the distribution level as well. That type of investment of course creates jobs not just within the utility sector itself but in the supply chain as well.”

“And then the bigger challenges we face in the UK are things like offshore wind”, he added. “To get 40GW of offshore wind by 2030 is going to require a coordinated effort across government and industry and a whole host of agencies. I think if you get the right people together you could start to move that investment forward at a pace over the next few years.”

He said what is really needed is coordination between government and industry: “I know there are discussions going on with the regulator and BEIS and a lot of people across the industry. But at the moment, the framing is one in which individual generators connect to the network on an individual basis.

“The opportunity to think about this holistically and create an offshore network with a ring main around the east coast is potentially is much more economic and efficient way to deliver that outcome for customers. But it requires coordination.”

“It’s not just about the capacity auctions and CfDs,” he concluded. “It also about creating the right regulatory framework and dealing with anticipatory investments. You need to invest to support 40GW, not wait for 40GW to come along and then invest.”