The UK at Risk of Blackouts Due to Decaying Electricity Network, National Grid Boss Claims

The chief executive of National Grid has warned that the UK is at risk of power blackouts due to an ageing electricity grid, as he slammed Ofgem’s plans to limit investment by the energy networks.

Speaking to The Times, National Grid’s John Pettigrew said that without investment, power lines in parts of the UK will “decay,” increasing the likelihood of outages.

The utility group, along with SSE and Scottish Power, is in a spat with Ofgem over the regulator’s plans to halve the return companies can make operating the UK’s electricity lines and gas pipes. 

In July, Ofgem unveiled proposals that would limit network companies to a baseline return rate of 3.95% from April 2021, half of the 7-8% profit they were allowed to run under the regulatory regime in place since 2013. It’s also less than the 4.3% rate Ofgem initially proposed last year for the RIIO-2 price control, to be in force from 2021 to 2026.

Spending by the energy network companies will also be slashed by £8 billion over the next eight years. 

Ofgem said it is cracking down on the network company profits to limit household bills. “This so that less of consumers’ money goes towards network companies’ profits, and more towards driving network improvements,” the regulator said. 

Ofgem’s proposals followed the revelation by Citizens Advice that the energy networks had made £7.5 billion in “unjustified profits” between 2009 and 2017.

Typically, network costs account for a fifth of consumers’ energy bills.

But Pettigrew suggested that crucial investment is being cancelled due to the changes. “It is deeply concerning for us because ultimately you're increasing the risk on the network. The risk of a loss of supply increases as a result of not spending as much on asset health, because the assets are deteriorating as they age.”

He claimed National Grid proposed more than £3 billion of investment in projects to increase the reliability of electricity networks. The new pricing regime meant this had been cut by an “unprecedented” 80%.

In particular, he drew attention to a £40 million project to replace one of two power lines supplying Sheffield. The power line has already shown reliability issues and needs to be replaced within five years. If it were to fail, the entire city of Sheffield would be supplied by just one power line, leaving it at risk of blackouts.

A spokesperson for the regulator told The Times: “Wherever network companies have demonstrated they need vital funding, we have given them the go ahead.” However, she said the regulator would not authorise billions of pounds of spending on proposals that were poorly evidenced.

That includes the replacement of the power line in Sheffield. National Grid was citing “a single survey from 2015 as evidence to justify spending a proposed £40 million of consumers’ money on this repair,” an Ofgem spokesperson told Energy Live News.

“We have left the door open for them to come back to us with better evidence and, if they provide it, we, of course, stand ready to fund this repair.”

Ofgem’s draft proposals allow £26 billion of investment in the country’s energy infrastructure by 2026, with the potential to authorise £10 billion more. 

Pettigrew also said the pricing controls would also lead to job losses at National Grid and its supply chain. Ofgem also disputed this, saying the proposals for the RIIO price control would create jobs.

National Grid has also suggested restricted investment would hamper the UK’s efforts to decarbonise its energy system. Nicola Shaw, head of the firm’s networks business, said the financial clampdown would put “barriers in the way of” the net-zero target.

Similar concerns have been also been raised by Scottish Power, which said the plans could “slam the brakes” on a green recovery from the coronavirus crisis. Chief executive Keith Anderson said Ofgem was headed for “a regulatory fight” and said the energy network companies may be forced to lodge complaints with the Competitions and Markets Authority, a threat echoed by SSE.