National Grid: We have a leadership responsibility

National Grid’s chief strategy officer Ben Wilson talks to Utility Week about the company’s “pivot towards electricity”, while stressing that hydrogen will have a “significant role” to play in the net zero journey. He also reflects on the potential for an interconnected North Sea grid and the lessons from his time spent running the gas network in Australia.

The net-zero journey is inherently a global one but across the world attitudes towards decarbonisation – and to energy use in general – differ greatly.

It’s a subject Ben Wilson comes back to frequently as he sits down with Utility Week at the company’s headquarters overlooking Trafalgar Square in London to discuss the priorities for National Grid, the company he joined as chief strategy and external affairs officer in November.

His role was created as part of National Grid’s restructure on the back of its acquisition of Western Power Distribution (WPD) and decision to sell its gas transmission arm.

The interview took place before Sunday’s announcement that Macquarie and British Columbia Investment Management Corporation had agreed to acquire a 60% stake in the business for £2.2 billion (of which more below).

Wilson will be familiar to many Utility Week readers for his time at UK Power Networks, where he was director of strategy and regulation and chief financial officer until 2015. However, for the following six years he was based in Australia, where he led the Australian Gas Infrastructure Group as well as chairing the country’s energy networks’ association. His reflects that his time in Australia and his work with National Grid colleagues in America have shaped his perspective on how net zero can be advanced in the UK.

We are speaking just a few days after Nigel Farage unveiled his intention to campaign for a referendum on net zero amid warnings that “decarbonisation” could replace “Europe” as the key ideological divide within the Conservative Party. However, Wilson points out that opposition to decarbonisation is nowhere near as entrenched in the political system here as down under.

“It’s such a battleground political issue over there,” he says. “Public attitudes are changing but on a political level the debate is so polarised.”

Contrasting this to the UK, Wilson points to much greater consensus, but warns against complacency.

“If I compare the UK to the US and Australia, we are in a good position here because the energy and climate change debate is more bi-partisan, less of a culture war issue. There’s always a risk that can change. So we all have a duty to build trust when we talk about this. We have to set out the facts and remind people that what we are doing here is very hard.”

While the UK may have a more progressive approach to net zero, Wilson believes there are lessons we can learn from countries like Australia.

As a vast country, with a different climates and time zones and a federal model of government, Australia has had to develop a highly flexible regulatory model to oversee the energy sector. Wilson explains: “The diversity is striking – in South Australia there is basically no coal now and there’s a very high renewable penetration, whereas somewhere like Victoria is probably 80% coal, a mix of brown and black.

“Because Australia is not that cold, gas is not seen as an essential in the way it is here. In Queensland, for example, there’s hardly any heating load at all – it’s a fuel of choice. You have gas for cooking outdoors, for instant hot water.

“So the regulatory system reflects that. There are some networks that are fully regulated – CPI-X five-year cycles – and there are others where the regulator has oversight but they agree their tariffs directly with the shippers. Then there’s small networks – 50,000 or 100,000 networks – that are completely unregulated.

“The flexibility in the regulatory system is quite striking.”

Moving with the times

Wilson is at pains to stress that the UK’s regulation of utilities remains “the gold standard globally” but he clearly believes lessons could be learnt from this flexibility.

The upcoming ED2 process (which will be handled by WPD’s own regulatory team) is an opportunity for regulation to adapt and Wilson urges Ofgem to create an environment where companies are empowered to make the right decisions themselves.

He says: “We should all be thinking about safety, reliability, customer service and cost. Collectively all stakeholders should be setting standards in those areas and it should be up to the companies as to how they deliver. We have to be careful not to overcomplicate the systems we have in place. It’s easy to add more complexity and we have to ask whether it’s necessary. Is it getting to a point where it’s taking away accountability from the companies?”

Wilson argues that while Ofgem’s remit has expanded, at its core the policy and regulatory structures governing the industry are still fundamentally those introduced to handle privatisation.

“In the 1990s the background was minimal underlying industry change and a real need to drive efficiency.

“Fast forward to today and those efficiency gains have been delivered. Now the overall mission is different – it’s net zero. So everyone needs to re-focus on that.

“Net zero at the lowest possible cost while maintaining security of supply needs to be the North Star that drives everything.”

While the three sides of the energy trilemma have been debated for many years now, Wilson believes they are still the key pillars for net zero and, crucially, they are increasingly compatible. Given the current heightened concerns over both the cost of living and where our power is coming from, it has never been more important for the industry to communicate clearly, he says.

“We need to reassure people that because of the falling costs of renewables, decarbonisation is no longer in tension with security of supply and affordability.

“We are no longer asking people to choose between decarbonisation and affordability. Of course we have a large-scale storage issue but in terms of megawatt-hours the cheaper forms of generation are renewable. We need to build confidence in that.”

Wilson says National Grid has “inherent responsibilities” as the UK’s largest transmission – and now distribution – company, as well as currently owning the Electricity System Operator (ESO), to help build that trust among the public.

He says: “We have a leadership responsibility. As a network operator we should be seen as an honest broker. We are agnostic as to where the molecules come from to deliver energy on our system as long as they meet those criteria across the trilemma.”

While National Grid can be a key influencer, Wilson insists this has to be done in conjunction with policymakers and regulators.

One key step would be for the government to fully embrace the ESO’s Holistic Network Design (HND) when it is released in the summer. The document will act as a blueprint for a coordinated onshore and offshore network to support the UK’s commitment to deliver 40GW of offshore wind by 2040. Wilson wants the HND to be officially recognised by government and regulator and to be given status so that it can be relied on in the planning process.

Building a North Sea grid

The challenge of knitting together the web of offshore and onshore assets necessary for net zero will be a key area of focus for Wilson, and once again there is a need look on an international level.

He talks about huge potential in the North Sea for partnerships to power a united energy transition.

National Grid is looking at multi-purpose interconnectors, which would allow clusters of offshore wind farms to connect together as opposed to one by one. The company is also exploring the potential for energy islands, which would add hydrogen electrolysers into collectively connected wind farm clusters.

“Put all of this together and you can see how eventually you could get to an interconnected North Sea grid.”

The broader role of hydrogen in the energy transition is also an area of interest, with National Grid involved in the Zero Carbon Humber Partnership and across the Atlantic eyeing a hydrogen hub initiative in New York.

Putting aside the debate over hydrogen’s future role in heat and transport, Wilson sees significant potential in the mid-stream.

“If you think about how much energy crosses international borders in the form of coal, natural gas and oil, in energy terms it’s absolutely enormous. How are we going to replace that? We’re still going to need big cross-country transfers of energy. That means a lot of prospective growth for interconnectors but it also creates a really solid use case for hydrogen. It is very reasonable to assume there’s going to be a very significant hydrogen mid-stream industry by 2050 and probably well before that because I don’t see how else we can transfer energy across borders.”

By then, Wilson expects the cost of producing zero-carbon “green” hydrogen to have plummeted but sees a role for “blue” hydrogen – produced by reforming methane and capturing emissions – in the interim. He cites the incentives for upstream oil and gas producers in Europe to invest heavily in this area and the “fantastic geology” of the North Sea for carbon capture as drivers for hydrogen production over the next decade.

Despite this faith in the future of hydrogen, National Grid this weekend agreed the sale of a majority stake in its gas business with an option to sell the remaining share within the next year.

In a statement provided after the interview, Wilson said: “This is a major step in delivering on our previously announced strategy to pivot our portfolio towards electricity and further enhance National Grid’s central role at the heart of the clean energy transition whilst maintaining the security of the network for the long term.”

On the direction of travel for WPD, Wilson points out that the distribution network operator now sits as a separate business unit within National Grid with its own management team.

A gradual process of rebranding the business is underway, with WPD vans now carrying a sticker acknowledging they are “a National Grid company”. Over the course of this year a wider rebranding will take place to refer to WPD simply as National Grid.

Given its move into electricity distribution, could Wilson ever envisage National Grid expanding further – as far as energy retail?

Wilson replies by describing the company’s strategy as “network plus”, adding “the overwhelming core of the business is going to be electricity and gas networks – probably more electricity now”.

Despite this focus on electricity, Wilson insists National Grid remains technology agnostic and focused on the end goal of emissions reduction.

“We’re going to need all the tools we can get hold of and keep an open mind. You simply can’t have too many options,” he says.