Network competition threatens UK access to cable supplies

Government moves to introduce competition into delivery of electricity networks could make it harder for the UK to procure scarce capacity in the global supply chain, the industry has warned.

Responses to the House of Commons environment audit committee’s inquiry into the transmission network, which have been published over the past fortnight, show widespread concerns about proposals in the Energy Bill to enable competition in networks that currently operate as monopolies.

In its response to the committee, SSE raises concerns that competition could delay engagement with a supply chain, which is already significantly constrained.

The company, which operates the transmission network in the north of Scotland, says it is already experiencing challenges contracting with suppliers of HVDC technology that is sold on a global market.

It adds: “The race to net zero means that suppliers are in high demand and are becoming increasingly selective about which investments they tender for in the UK. We are seeing the existing supply chain being maximised up to 2030.”

TenneT, which operates the transmission system in the Netherlands and much of Germany, is “swallowing up” available resources to meet ambitious EU offshore wind targets, it adds.

“Creating delays in supply chain engagement could negate any potential consumer benefits from competition, as material costs and financing costs continue to increase,” SSE adds.

Much of the distribution level expansion required will be on low voltage networks that do not lend themselves naturally to competition, according to SSE, which also operates such networks in Scotland and the south of England.

And while supporting the principle of opening up competition at an early stage, SSE says it is unlikely doing so late will deliver significant benefits for consumers.

This is because the design work, where most innovation can be applied, has mainly been completed by this point with only the construction and operation of the asset to be tendered for.

The response says SSEN Transmission already carries out a competitive procurement process for projects, which means limited scope to secure additional consumer benefit by introducing network competition at this late stage.

It says: “To date, the analysis presented lacks a robust economic impact assessment to justify the risks associated with fragmenting our critical national infrastructure.”

Energy Systems Catapult’s response adds that while competition for new network developments is “conceptually attractive”, it must be balanced against the reality of delivering such projects in the context of “fierce global competition” for access to supply chains, such as cable manufacturers.

It adds: “There is a risk that introducing competition inadvertently slow down infrastructure build by going to the supply chain project by project rather than a programme of projects.”

However Octopus Energy, in its response to the committee, backs competition in the onshore network, which it says should be allowed as early as possible in the development process rather than waiting for the Electricity System Operator’s designs.