Time to end the gridlock in Britain’s National Grid

Last month, the who's who of the energy business gathered in my hometown of Oxford for a conference.?

For an industry event the tension was thick in the air.

From the opening keynote speech from Ignacio Galán the room crackled.

ScottishPower is owned by the Spanish renewable electricity group Iberdrola , and its chairman, Ignacio Galán, has stated that the company cannot afford to wait five years to obtain permits before beginning construction on infrastructure that they know is necessary when the infrastructure itself could be completed in just twelve months.?

The length of time it takes to build energy infrastructure in the UK was highlighted throughout the day, "We've got a solar farm with a battery that we want to construct in Durham, and our grid connection there is 2036," said Greg Jackson , CEO of Octopus Energy , the supplier and developer. “It is power that might be utilised right now to reduce energy bills.”?

"Meanwhile, in Germany, emergency legislation was passed to allow the construction of five liquefied natural gas facilities in less than a year." “What is it about gas that allows us to achieve this but not clean, inexpensive electricity?"

With the goal of reducing climate-altering emissions and decreasing its dependence on the costly imported gas that has caused the cost-of-living issue, Britain is aiming for a massive rise in low-carbon power. The government has set several very ambitious targets, including increasing offshore wind capacity from its current 14 GW to 50 GW by the year 2030, which was selected as one of the chancellor's five major growth areas.?

Yet, as CEO and executive alike stressed at the Aurora Energy Research Spring Forum conference, the practical realities of red tape and policy and regulatory delays are making it difficult to meet Britain's green objectives.?

RenewableUK chief executive Dan McGrail claims this is happening despite a "more challenged" investment climate as a result of factors such as the United Kingdom's new windfall tax on low-carbon power generators, soaring costs, and rising international competition thanks to the United States' new Inflation Reduction Act subsidies. There is "a very genuine concern that investor confidence (in the UK) has been impacted over the previous six months," as McGrail puts it.?

Yet, securing planning approval to Britain’s National Grid remains a high priority.?

Under-resourced planning authorities and environmental regulators, imprecise advice to those agencies, and a lack of streamlining within the process" are all to blame for the lengthy approval process for offshore wind farms, which can take up to five years.?

In addition, projects need National Grid 's permission to connect to the grid, which may be a time-consuming procedure in and of itself. Seabed leases for new offshore wind farms off the coast of Scotland may not be connected for a decade or more.

"The grid is the big bottleneck," McGrail said. “Unless we can connect things to the grid in a timely fashion, then we can’t speed up the industry.”

For off-shore wind the delay is due in part to the necessity for network operators to physically update the onshore power lines that transport energy to where it is required. New cables need regulatory clearance from Ofgem , which has hitherto been sluggish to approve such costly, consumer-funded projects ahead of necessity; they also require planning permission, which may be even more difficult than for power plants.?

Similar can be said with regards to electric vehicle charging, the infrastructure needs to be there before we can place the niceties such as vehicle charging points.

Nonetheless, Jackson feels that it is also a trait of "bureaucracy" that needs to be addressed. The grid connection system is "completely out of date." Connections work on a first-come, first-served basis; the current backlog contains more than 140 projects totalling more than three times Britain's entire existing electricity capacity. Many will never be developed and are essentially bed-blocking, clinging to their coveted queue positions and asking for time extensions. This, according to Jackson, is a significant barrier to investment: "You can't put hundreds of millions of pounds away in the expectation that sooner or later you'll get to the head of the line, just to be delayed again."?

Finally, it seems that steps are being taken to address these issues. The government set out proposals aimed at speeding up planning and networks in its Powering up Britain strategy, published the day after the Oxford conference, including designating offshore wind as "critical national infrastructure" and appointing a new commissioner to review how to speed up grid upgrades. Ofgem has hastened permission for onshore grid improvements and is working on overhauling the connection procedure with National Grid and the government.?

"There are fantastic efforts underway," McGrail said, "but we still need the government to truly lead and take action on delivering those packages of work."?

A study released two weeks ago by the government's offshore wind champion, Tim Pick MBE , concluded that network enhancements needed to be implemented "on virtually a military posture," and warned that unless further steps were taken to hasten grid connections, the government's 2030 targets would be missed.?

Reaching the 2030 objective would also need financial assistance that keeps up with cost inflation. The government supports renewable energy investment by establishing contracts that ensure customers will pay a set price for the power generated. These contracts are currently granted via yearly auctions, with fixed prices having declined considerably over the last decade. Many projects given contracts last year, including Orsted's massive Hornsea Three wind farm, are now in jeopardy as rising raw material costs leave supply chain businesses unable to deliver projects at the price they were tendered for.?

Although ScottishPower , another of last year's market winners, has said that it would go through with its East Anglia 3 project, Galán has warned that "the design of subsequent auctions will have to include this reality of cost inflation moving forward."?

The government's time to solve the problem is running short. The auction for this year has already begun, and Alistair Phillips-Davies , chief executive of SSE plc , another offshore wind company, feels officials have set contract rates that are too low to reflect escalating expenses. "It's just inflation," he said. "The cost of steel, the cost of supplies, labour availability, and ship availability." He cautioned that this year's auction "doesn't seem to be doable." They've set the costs too high, and I doubt they'll get anything completed."?

If the government is to meet its ambitious 2030 aim, it must act quickly.?

Give us more incentives, says the electricity industry.?

According to industry organisations, one easy measure the government might take to improve Britain's green investment environment would be to provide more substantial tax benefits for renewable projects?

Prior to the budget last month, the chancellor was flooded with letters from the energy sector requesting similar incentives to help level the playing field with the US, balance the effect of rising prices, and erase some of the harm caused by the windfall tax. The budget included capital allowances for eligible plant and equipment investments throughout the economy until March 2026. Despite the fact that renewables developers should gain, they were left wanting more.?

"One thing they could do," said Dan McGrail , chief executive of RenewableUK , "is prolong the lifetime of those capital allowances, at least for the five essential vital businesses."?

"Most of the capital spending on the projects we're working on in offshore wind, in particular, goes outside of that three-year timeframe." If you decide to develop a wind farm today, you'll be spending a lot more money in four or five years."?

In the absence of tax benefits, Orsted, which had threatened to abandon its ￡8 billion Hornsea Three wind farm, announced following the budget that "the lion's share of capital spending on Hornsea Three and other prospective offshore wind projects would lie outside the qualifying scope and timeline."?

Extending capital allowances for another two years "would tremendously enhance business cases and help projects go forward," according to McGrail. "I believe that is probably the most feasible economic option that the administration has."