s0101124, 10.03 Briain needs an unprecedented expansion of the electricity gra Subscribe My Economist v Britain | The Great Rewiring Britain needs an unprecedented expansion of the electricity grid That means a bigger role for the state, whoever wins the election IMAGE: NATIONAL GRID Jan 4th 2024 Share Think differently this new year with a half-price subscription. Get 50% off ntipsilweww economist comiortairv2024/0 /04/britain-needs-an-unprecedented-expansion-of-the-lectiity-grid anos0101124, 10:08 Briain needs an unprecedented expansion of the electricity gra Listen to this story. Enjoy more audio and podcasts on iOS or Android. 0:00 / 0:00 OR DECADES the electricity grid—the mix of inverters, pylons, substations F and transformers that connects sources of energy to consumers—has barely featured in British politics. Fuel burned, turbines spun and transmission lines hummed as energy moved from power plants to urban centres. Distribution grids took over from there, carrying energy over the last mile into factories and homes, so machinery could whirr and kettles boil. pn Th tks, Britain’ hi Clean ommetition e system works. Britain's grid has Carbon intensity of electricity long been one of the most stable in Grams of CO; equivalents emitted the world, according to the World per KWhof electricity wee eas a Bank. The British grid is also one of China the world’s cleanest (see chart), a 600 emitting a third less carbon dioxide = than the German grid did in 2022. Other G7 = “Liberalisation and privatisation cous el Bic 200 — have delivered the outcomes you ee 5 want,” says Guy Newey, a former 70 2~« bt policy adviser who now runs Source: Our World in Data Energy Systems Catapult, an outfit IMAGE: THE ECONOMIST that helps startups. But the grid’s days of quietly efficient obscurity are over. The demands of decarbonisation, needed to slow down climate change, have propelled it up the political agenda. The Conservatives have promised a grid whose operation causes no net emissions of carbon by 2035. Labour has pledged to do the same by 2030. ADVERTISEMENT hitps:vww economist comfbritain/202410 /04/brtair-neads-an-unprecedented-expansion-ofthe-slactrcty gra 2nos0101124, 10:08 Briain needs an unprecedented expansion of the electricity gra That is an enormous undertaking. Renewable sources of power, such as wind turbines and solar panels, must be plugged into the grid; so must banks of batteries to smooth out variable supply. Britain must increase the amount of grid infrastructure that is built every year by a factor of seven, says Adam Bell, formerly the government's head of energy strategy, now of Stonehaven, a consultancy. The current system is not equipped to meet this challenge. Regulatory processes are geared to slow and predictable change. In an independent review of the grid commissioned by the government and published in August, Nick Winser, an energy grandee, wrote that it currently takes between 12 and 14 years for new transmission lines to go from conception to being switched on. If this sort of sluggishness persists it will torpedo both parties’ grid ambitions, not to mention Britain's hopes of meeting its climate targets. It will also hurt the economy. Housing and data-centre developments are being held back by the lack of available connections; the queue of connection requests is gigantic. British electricity looks dear compared with neighbouring countries. “Reducing emissions comes after the economic benefits of solving the grid,” says Sam Alvis of Public First, a consultancy. “It’s the number one thing that British business needs to compete.” Some action is already being taken. On November 27th Ofgem, which regulates the electricity grid, changed the way it handles requests to connect. The old system was a first-come-first-served affair, in which everyone just waits their turn. A 1Gw solar farm in the Midlands was recently added to the queue, with a connection date brushing up against 2040. The new rules introduce strict milestones for grid-connection proiects—whether land rights hitps:www- economist comfbritain/2024/0 /04fbrtair-needs-an-unprecedented-expansion-ofthe-slactrcty gra ano‘0%, 10.08 Brain needs an unprecedented expansion fhe ety ad have been secured, s say—and give the grid operator, National Grid Eso (NGESO), the power to kill both new and existing requests which do not meet them. The idea is that this will eliminate speculative “zombie” projects, which bag a spot in the queue in order to be bought out. ADVERTISEMENT Mr Winser’s report made 18 recommendations to speed things up further. In one way or another they involve moving away from the case-by-case processes of identifying need, carrying out a preliminary design, gaining regulatory approval and planning permission, buying components and hiring workers. All grid infrastructure should be built according to a single plan, he concluded, with the government, regulators and grid operators united behind it. The state, in other words, needs to start playing a bigger role. This shift is also under way, most obviously with the nationalisation of NGESO. The creation of the Future System Operator (Fso), as the new government-owned grid operator will be called, is one of the primary goals of the Energy Act that received royal assent in October. The government is due to buy the operator this year from National Grid, a private company which builds and owns physical grid infrastructure. This is to avoid conflicts of interest as NGESO develops a countrywide plan for the transmission network to efficiently connect far-flung renewable generation with pools of mostly urban consumers. If the Tories have already paved the way for greater government control of the grid, Labour would B0 further and faster. That is partly a matter of political tpt economist convbriin/202401/04brtain-noacs-anunpracadentd-axpansion-of-he-lecciy id anoso101124, 10:03 Briain needs an unprecedented expansion of the electricity gra economy. Labour is 1n a stronger position to ram througn more electricity infrastructure because its own supporters are less affected by it. The plans being drawn up by NGEso for the future grid happen to require pylons to be tun through just a single existing Labour seat, according to Mr Alvis. The party intends to increase the number of planning officers and to standardise environmental surveys so that a given project can gain consent faster. More radically, Labour also plans to set up a state-owned company called GB Energy. This will run a purchasing consortium for all buyers of grid gear, aping a successful Dutch system, in order to ensure that equipment is procured upfront and on time. Some of that gear, Labour hopes, will come from British factories. GB Energy will also bid to construct some bits of grid infrastructure. Building seven times more grid every year requires a commensurate increase in investment; Labour sees this as its only way to have a net-zero grid by 2030. It is a goal, says Andrew Sissons, a former policy official now at Nesta, a charity focused on innovation, that implies an “almost wartime effort”. ~ i ls Z| b < sa ca Bs Volting ambition IMAGe: NATIONAL GRID Part of the idea, says Mr Bell, is to hold down capital costs by using the government's ability to borrow cheaply. This is a model the current government has used to build nuclear power plants, risky projects that attract high interest rates In the same wav GR Fnersv will nrohably trv to bid on hitpslwiw.economist comfeitain’2024/0 04brtain-neads-an-unpracedented-expansion-o-the-elactrcy ari snos0101724, 10:03 Briain needs an unprecedented expansion of the electricity gra riskier and more expensive grid projects. If it wins these contracts, then the consequences could be material. “It is quite radical,” says Mr Sissons, “because it implies some partial nationalisation of the grid. Those new bits of grid infrastructure may end up in state hands.” Private operators hope that they will also be allowed to bid against National Grid and GB Energy to build lower-risk bits of the grid. Eclipse, an independent distribution network operator (DNO) owned by Octopus, a utility, thinks it could deploy £3bn ($3.8bn) of capital if it received a licence for transmission work. ADVERTISEMENT There are pitfalls aplenty here for Labour. The most obvious is that there is simply not much public money available for the kind of state-led activity it envisages. Under the current model, grid upgrades are paid for by energy consumers via bills. If the government ends up funding the construction of electricity infrastructure directly, via the exchequer, it will find it has a fiscal “tightrope” to walk, says Mr Sissons. Asecond challenge is to ensure that the roles of all the state bodies are clear. “What is absolutely needed urgently is a very clear articulation of what is the responsibility of Fso, what is the responsibility of Ofgem and what is the responsibility of the government,” says Mr Newey. “A messy set of overlapping responsibilities could lead to finger-pointing.” The third looming problem is that distribution networks, which bring electricity over the last mile to consumers, are not yet part of any rewiring hitps:www economist comibritain/202410 /04fbrtair-neads-an-unprecedented-expansion-ofthe-slactrcty gra eno1010124, 10.03 Briain needs an unprecedented expansion of the electricity gra plan. pNos do not have good systems for monitoring their networks and often know that they have reached capacity only when a substation blows out. This could lead to a situation where the transmission grid has been successfully decarbonised, but there is no way to plug in all the cars and heat pumps which use that clean electricity. Current plans The best way to minimise these risks is to maximise the amount of efficiency that can be squeezed from the existing grid. “The debate is about how much emphasis you put on building, and how much you put on flexibility, so you're making the most of your system,” says Mr Newey. Flexibility would mean changing the way the electricity market is regulated to allow different prices to be charged to consumers on different parts of the grid. At the moment, for example, Scottish wind-farm operators are paid to switch off their turbines when the wind blows strongly because the grid does not have the capacity to send all the electricity they generate to consumers, “One answer to curtailed Scottish wind farms is to build loads of transmission to get it to the south of England,” says Mr Newey. But he thinks it would be better to have location-based pricing which both encourages generation to be built nearer demand centres and incentivises new sources of consumption, like factories, to be built where power is cheaper. Utilities like Octopus agree. Labour believes that the task of rewiring Britain is important enough and urgent enough that public money and central planning are the only way to achieve it quickly. Even if Labour's goal of making the grid net zero by 2030 is arbitrary, speed is undoubtedly necessary. But the risk is that state intervention dampens price signals, leaving Britain with an expensive, overbuilt grid. The costs of that would, as ever, end up being paid by consumers. For more expert analysis of the biggest stories in Britain, sign up to Blighty, our weekly subscriber-only newsletter. Explore more Britain This article appeared in the Britain section of the print edition under the headline "The Great Rewiring" hitps:iwww- economist comfbritain/2024I0 /04fbrtair-neads-an-unprecedented-expansion-ofthe-slactrcty gra m0