- September 15, 2015
- Posted by: Catalyst
- Category: Business Energy News
New figures released by National Grid last month show that Britain is heading towards a serious energy capacity issue. Demand is increasing, power generation spare capacity is decreasing, and this leads to an increased likelihood of the lights going out.
The main cause of this power problem is the UK’s Soviet-era energy infrastructure.
The National Grid has an obligation to provide a reliable and future-proof power grid. However, it is also a listed company and therefore has responsibilities to its shareholders, and must be driven by commercial considerations.
Like all businesses, it needs to make money; which it does from projects such as building interconnectors and managing power grids in the US.
However, for many years, the National Grid has failed to invest in forward thinking technology.
Worse, the grid has been neglected for so long that it is currently in a state where new capacity cannot be added without major upgrades.
The development of new energy generation is sorely needed, but building new power stations is a lengthy process as well as a significant investment.
This is where interconnectors come in. These are long cables that allow power to be traded across market boundaries.
At the moment there are four interconnectors in the UK, linking to France, the Netherlands and Ireland.
These interconnectors offer a cheap, easy and clean way of increasing capacity, but due to the obsolete nature of the UK grid it takes major reinforcements across the entire network to install even the smallest interconnector.
On the South Coast of England, where energy demand is highest, the grid doesn’t have the capacity available to connect any new generation or interconnection at all.
To make matters worse, National Grid is now entering new markets, such as carbon capture and storage, which it is not qualified for in order to make up for the shortfalls in the grid.
This solution actually creates more problems for the whole industry, but they are actually in the interest of National Grid because it is unable to connect any project any way.
The company has also been spending money it could be using on updating the system on things like replacing older pylons with newer, more sleek looking designs.
The true solution to these problems lies in reforming the National Grid. The current company has a hugely bureaucratic structure with lots of hidden costs and an unclear development strategy.
Anyone exterior to the company has little idea of the processes taking place inside it, and this problem is set to worsen when the new Ofgem proposals, part of the Integrated Transmission Planning and Regulation paper, are implemented.
Their proposals involve enhancing and extending the National Grid’s remit as a public service that is responsible for coordinating and directing the flow of electricity across the UK.
To deliver on this proposal the National Grid would need to collaborate with outside contractors.
However, this would involve exposing the conflicts within the organisation.
Given the vital nature of the public service the National Grid supplies the situation needs to be rectified as soon as possible. A division within the company, separating it into a profit-generation side – focussing on global links and interconnection – and a public service side – focussing on maintenance and improvement of the power grid – is the most reasonable solution.
However, these changes need to pressed upon National Grid from above. The reform of National Grid needs to be forced by the UK Government. Otherwise, their own new housing program could feel the negative impact of the UK’s lack of capacity – new housing requires substantial additional capacity, which has yet to be taken into account when it comes to the current grid.
If nothing is done to improve the dire situation of the grid winter blackouts could start to become a regular occurrence.