This test of network resilience is far from over

Energy networks have risen to the incredible challenges resulting from coronavirus with aplomb. However, senior industry figures have raised concerns with Utility Week over how they will cope with a prolonged lockdown and the long-term implications of the pandemic. Jane Gray looks at the key issues.

The response of the UK’s energy networks to the immediate challenges posed by coronavirus in the UK has been swift and deft.

Across the board, leaders have shown reassuring confidence in deploying pandemic response plans which, no doubt, few ever envisaged having to enact. And they have unanimously done the right thing in focussing first and foremost on the safety of colleagues, before taking rapid steps to shore up continuity of supply to beleaguered households and critical care sites.

But as lockdown continues across the UK, with no defined end date, concerns are increasingly being aired about the longer-term implications that coronavirus could have on network reliability, on field trials for important innovation schemes and on the financial health of both core utilities and their supply chain.

In recent weeks, Utility Week has followed closely the story of the networks industry’s response to the Covid-19 threat with stories recording the steps companies have taken to ensure safe working conditions for staff, both in the field and at critical sites like control rooms, and to establish reliable homeworking systems for the vast majority of staff usually based in office locations.

With the exception of a few IT teething issues – for example needing to expand maximum capacity for simultaneous connections to back office VPNs – these steps have been taken smoothly. And staff have responded to their new conditions with a laudable display of flexibility and commitment to playing their part in the national response to coronavirus – dedication which Utility Week is celebrating in our Keeping Us Connected campaign.

We’ve also heard about collaborative network efforts – bringing together gas and power infrastructure owners – to work with suppliers to build up appropriate inventory of key kit and equipment so that major failures in the UK’s critical national infrastructure do not add to national woes.

And in the same vein, we’ve heard about a focussed collective effort to establish a new enhanced reporting regime for the industry.

This now provides Ofgem and, ultimately, government, with weekly insight into the resilience of the UK’s critical energy infrastructure and the health of the businesses responsible for maintaining it. The importance of providing this visibility of key metrics such as sickness levels, quality of service measures, contact centre call volumes and more to the formulation of a coherent national strategy for combating coronavirus and keeping the population safe should not be underplayed.

But, as the sector settles into a new groove of widespread homeworking and conducting essential operations within social distancing guidelines, network leaders are increasingly turning their eyes to the longer-term impacts of coronavirus and the risks to resilience posed by an extended period of lockdown.

In for the long haul

It is now abundantly clear that social distancing measures are unlikely to be lifted within the near future. Some commentators have said they look set to remain in place at least until the end of 2020.

Speaking to Utility Week, senior industry figures, including one network chief executive, have expressed concerns about the implications of delayed maintenance schedules for network resilience over the coming winter.

In recent Utility Week webinar, Ofgem chief executive Jonathan Brearley expressed confidence that “deprioritised work” which has taken a back seat during lockdown will be caught up without compromise to the UK energy networks’ world leading levels of reliability.

Our sources were less bullish however, highlighting that a continued need for field staff to social distance will make efficient operations and swift completion of delayed maintenance and replacement work very difficult to achieve.

While some work can undoubtedly be left until next year, the need to pick and choose what gets done before winter storms inevitably put infrastructure to the test will be undoubtedly put asset and operations leaders under pressure.

And while short terms stocks of key kit and equipment have been shored up, it is possible this challenge will be exacerbated by longer term impacts on the industry’s supply chain. Utility Week understands, for instance, that some networks are being told by suppliers that transformers – a fundamental for the power system – are now dwindling in availability.

As time wears on, this could leave networks having to make trade-offs between completing planned capital projects for new capacity or preserving precious transformer supplies in case of unexpected failures in existing kit.

Financial strain

It is not just operational resilience which will start to strain while measures to contain coronavirus remain in place. Financial resilience will also increasingly come under pressure, both for infrastructure owners and their supply chain.

It has already been widely identified by industry commentators that the short-term downturn in energy demand created by lockdown will have a knock-on effect for energy network revenues. UK Power Networks chief executive Basil Scarsella recently told Utility Week he predicts a £30-£40 million dip in revenues as a direct consequence of lockdown, which he expected to cause a 10-20 per cent reduction in energy demand across UKPN’s license area.

Some have expressed confidence that this immediate impact can be recouped via increases to future network charges, spread across a number of years to avoid consumer detriment.

However, others have shared worries about the cash flow implications of this. It has also been pointed out that there is no assurance energy demand will recover to pre-coronavirus levels in the foreseeable future due to the likely collapse of numerous industrial and commercial energy users – especially in the SME base and the entertainment and leisure industry. While these businesses may not be intensive energy users individually, they collectively account for a significant amount of network load, the loss of which will mean a long-term reduction in revenues.

Meanwhile the ability of crucial supply chain organisations to weather a long coronavirus storm is a key topic of debate across the whole utilities sector. Given the scale of maintenance and capital work in across energy and water infrastructure which relies on contractors and technology providers, from large tier ones to SMEs, it is essential that concerted action is taken to protect their wellbeing.

Many companies have already taken action to provide greater visibility of planned capital budgets to suppliers and have made commitments to new very prompt payment regimes to help them forecast and maintain cash flow more confidently. But will such steps be enough? And is there scope for a more coordinated approach to supply chain from the core utilities collective?

We are still in the relatively early days of this crisis and it’s difficult to say how serious any of these worry areas may prove to be. Certainly, networks have shown the worth of their operational and engineering prowess in the face of immediate need, and no doubt as the potential for longer-term risks emerge, the skills of strategic thinkers will equally come into their own to fend off any compromise to safety, reliability, or the all-important progression of decarbonisation plans – which Ofgem has been clear, remain a priority. What is clear though, is that this test of network resilience is far from over.

Learn more about the implications of coronavirus for the UK’s energy networks in Utility Week’s webinar on Friday 1 May. Industry speakers will include Basil Scarsella, chief executive of UK Power Networks and Peter Emery, chief executive of Electricity North West.