FUTURE FOR THE NATIONAL GRID. THREE HEADLINES SAY IT ALL.

UK grid loses half the power from link to France.

National Grid powers up for a renewables future.

National Grid to be spared from break-up.

(all from FT, November 2016)

 The UK currently faces a tight supply situation through this winter, which may be exacerbated by downtime on French nuclear plant and partial loss of capacity on the submarine interconnector. National Grid as the system operator plays a key role in keeping the lights on, by finding ways to manage these and other unforeseen events, and balancing supply and demand in real time. It will also face new challenges in managing generation supply that contains an increasing proportion of renewable energy, with significant intermittency of supply. These challenges increasingly emphasise the difficulties in separating the roles of a transmission operator, managing and maintaining the high voltage network, and a system operator, directing many aspects of the day to day business of power generation. As I observed in an earlier comment, Low carbon network infrastructure. Not sufficient arguments for breaking up National Grid. the House of Commons Select Committee was ill advised to recommend the break-up of National Grid on the grounds of an interpretation of regulatory theory that addresses yesterday’s problems. Keeping these functions together implies that the government has to address the problems of a difficult low carbon future, not the outdated paradigms of the 1990s.

Three stories for the UK power sector came together in this week’s FT, all focused on National Grid, who maintain the UK’s high voltage long distance transmission network and also act as the system operator, essentially controlling the operation of the UK’s generating plant in order to maintain supply/demand balance and stability of power flows within the system. The first story, National Grid Powers up for a Renewables Future, describes how National Grid is refocusing its business to cope with the challenges of renewables.

Some analysts believe we are on the verge of a fragmentation of the power sector that will eventually lead to much more emphasis on local power generation and battery storage, making the high voltage grid redundant. I believe this extreme position is highly improbable, for two main reasons. First, a very high proportion, at least of new low carbon sources of power currently anticipated in most projections, is in sources of generation that are intrinsically either large scale or remote from population centres. This includes nuclear (excluding for the moment small modular reactors), carbon capture (CCS) and large scale renewables such as offshore wind. These and probably other options such as tidal lagoons, depend on access to long distance transmission to make them viable.

Second, smaller local systems face much bigger balancing problems, primarily because they lack diversity. Interconnection is therefore a necessity. There may be some specific issues of network charging, if local facilities believe local generation and lower “imports” allow them to escape paying for the back-up services the local system needs, but it is not clear why these issues should undermine the fundamentals of the National Grid business model.

It is true that the essentially intermittent nature of many sources of renewable power will make the Grid’s job, as system operator, more challenging. Viewed from this perspective even a system as large as the UK can benefit from additional diversity and from the back-up potentially provided by interconnection with other networks. This takes us to the second FT story, on 29 November, UK Grid loses half the power from link to France.

Damage to the cable, possibly from a marine anchor, has temporarily reduced the capacity of the link. Coinciding with some unanticipated downtime on French nuclear plants, this increases the risk of a tight supply situation this winter and a spike in short term market prices (one independent supplier has already gone to the wall). The impact of this loss of capacity, on France as well as the UK, emphasises the importance of interconnection for security of supply, and also the role of the Grid.

This leads us to the third story, National Grid to be spared from break-up, also on 27 November. The government has sensibly rejected the recommendations of the Select Committee chaired by the SNP’s Angus McNeil. As I argued in an earlier comment, the drive to a low carbon economy is going to bring profound changes to the power sector. These start with questions of technology and scale but they have huge ramifications, and conventional assumptions about markets, regulation and governance are coming under increasing pressure. Given that governments lack any technical competence in the power sector, the role of organisations like the National Grid is becoming more and more important. Now is not the time to take the risks of disruptive organisational change for its own sake.

To embark on a re-organisation of National Grid, in the absence of a clearer vision of where we need to get to, and focusing on issues which in a sense are problems of the old paradigm, may be a mistake. To do so without a clear direction of travel will simply add to the policy uncertainties already identified as a major problem for new investment.

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For a fuller discussion of the National Grid break-up question, refer to the earlier article: Low carbon network infrastructure. Not sufficient arguments for breaking up national grid.  Some of these challenges sit at the heart of the Oxford Martin Programme on Integrating Renewable Energy.