Last week’s NAO report made for pretty damning reading, especially if you are head down in trying to deliver the energy transition. I’ve documented over the past few months how we, as an industry, have moved from focusing on carbon reduction and sustainability to just ‘getting the job done’ when it comes to building the low carbon energy system of the future. It appears, however, that those responsible for making sure that low carbon energy actually gets to where it is needed have been asleep at the wheel. At the Future of Utilities Energy Transition event earlier this year nearly everyone I spoke to highlighted how the grid was the enabler of the transition we need. But the publication of the NAO report last week seems to indicate that the network of the future is falling well behind. But why is this? The NAO report has some answers.
Because the network was allowed to fall behind generation, by design
DESNZ’s “Connect and Manage” policy, adopted in 2010, let generators connect before the network was ready to accommodate them= - achieving its aim of speeding up connections but has been increasing constraint costs ever since.
From 2015, DESNZ took a more market led approach, stepping back from planning. But without a shared spatial plan, DESNZ, Ofgem and the system operator had no common or agreed view of how much network investment was actually needed. This meant that there was not just a backlog but a repeating pattern of failing to recognise that projects weren’t being completed and, as a consequence, no action was taken to fix it.
Because good decisions were made too late
An early proof point - the Eastern Green Links, seen as key to reducing constraint costs, were first proposed in 2009 and 2012 but full construction funding was not approved until 2024.
Had they been completed on the original 2016 timetable, NESO estimates they could have paid back their full construction cost by 2030 through reduced constraint payments alone. Delivering the same projects but far behind schedule has made them more expensive, due to higher financing costs and intensifying global competition for materials and labour as other countries expand their own grids; global supply chains have also been affected by volatile geopolitics.
Because delivery is still not catching up, even now
Of the eighty-eight projects identified by NESO, twelve have been completed and a further twelve absorbed into newer projects, leaving sixty-four ongoing. Of these, only seventeen are in construction; most are still at design, planning or early scoping stage.
Thirty-two of the fifty-six essential projects are off track or carry significant delivery risk, and none of the projects NESO said needed accelerating have actually been accelerated. Skills shortages, supply chain pressure, planning consent delays and system access clashes are named as the recurring blockers across almost every project.
Because no one is actually accountable for the whole system
Transmission Owners are privately owned and responsible for individual projects. NESO advises on what is needed but cannot compel delivery, whilst Ofgem approves funding but has stepped back from detailed cost scrutiny to keep pace with volume.
The NAO found that no single person or organisation is accountable for the overall progress or value for money of the eighty-eight project portfolio. Transmission Owners share project information with government on a voluntary basis, and the board set up to oversee the whole programme has limited formal powers, relying on influence rather than authority.
Grid upgrades are funded through consumer bills rather than public expenditure, which means they escape the business case and options appraisal that would normally test whether this is the best way to spend seventy billion pounds.
Because the fixes now underway will not arrive in time
DESNZ rates half of its own ten delivery workstreams as amber to red or red, with planning consent and connections reform judged the highest risk.
The reforms meant to properly coordinate generation, demand and network investment, the Strategic Spatial Energy Plan and Centralised Strategic Network Plan, are not expected until 2027 and 2028 respectively; too late to impact delivery of the projects needed by 2030.
The NAO’s own conclusion is stark. Value for money now depends entirely on delivery, and delay increases both project costs and constraint costs while pushing back the benefits of clean power.
That warning is ringing warning bells with people who work in and around the sector every day – and have seen the impacts of failure to deliver before.
David Watson, of BFY Group, comments ‘This has been entirely foreseeable for some time. For years we have heard the industry say we need to build out the network, the supply chain is difficult, projects are slipping, constraint costs are increasing. Efforts have been made to mitigate it, but they have been insufficient to the scale of the challenge. We’re now at the point where some pain is inevitably locked in, unfortunately. Unblocking transmission projects should be of national strategic importance. More should be done on locational demand signals. And for networks, they need to start thinking about how they can get out ahead of this because waiting for it to land could be a communications disaster come the next election.’
Having worked in media teams for energy retailers during the high pressure periods in the early 2010s, when retailers were under extreme price scrutiny, it seems to me that networks and transmission companies might soon be facing the same scrutiny. There’s been a lot of shifting priorities and blame apportioning. What we need right now is deep focus on delivering the critical connections programmes that will enable renewables to truly deliver on the energy transition.