Delivering the clean energy grid of the future
John Sturman, managing director, NatPower UK
Although the new UK Government has bold ambitions to position the country as a clean energy superpower, several barriers still need to be addressed if the UK is to accelerate the energy transition, writes John Sturman of NatPower UK.
By working with the private sector, the Government aims to; double onshore wind, triple solar power and quadruple offshore wind by 2030s; create a new public-owned organisation to push forward the transition called Great British Energy; and create a ‘Rooftop Solar Revolution’; all to enhance energy security, lower household bills, and unlock the economic benefits of a clean energy future.
Luckily, the clean energy revolution is not starting from scratch. Since 2021, wind energy has accounted for almost a quarter of the country’s energy consumption, and the share of renewable electricity generation hit 50 per cent in the first quarter of this year.
However, several barriers must be addressed if the UK is to accelerate the energy transition. A decades long lack of investment and modernisation in the energy grid has led to severe bottlenecks in the connections queue. As a result, many projects are receiving connection dates well past the Government’s 2030 clean energy delivery target.
Couple this with out-of-date planning regulations and we’re seeing good projects being cancelled, investment shifting to mainland Europe and the US, and economic growth stalling, alongside our energy transition.
Delivering a clean energy grid fit for the 21st century requires ripping up the old rulebook, enabling grid competition and external investment, and increasing innovation. To do this, we need to do four things:
Firstly, implement selective interest rate cuts to increase investment in energy transition. Secondly, open up and promote investment in grid infrastructure. Third, break grid monopolies and introduce competition for energy networks. Lastly, consider new approaches to how renewable energy generation and storage is priced. These actions are needed to modernise our decades-old electricity generation and distribution system that relied upon and was built around fossil fuels.
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The benefits the UK would see from these four changes are profound. By fostering innovation and new ideas, the Government could create over 1 million new jobs in clean sectors, stimulate economic growth by £240 billion by 2050, lower household bills for consumers, and strengthen energy security through home-grown clean energy.
Such actions could also position the UK to capture a larger portion of the $7 trillion in private capital expected to be invested annually in the global energy transition, while also meeting emissions reduction targets. On the flip side, failing to act could leave the UK unable to meet the anticipated 50% increase in electricity demand expected by 2035, and may even result in regional blackouts by 2030.
Implement selective interest rate cuts
In a time where the Government wants to increase private investment in clean energy, looking at interest rates is important. High interest rates can put investors off, leading to a focus on other geographies, like mainland Europe or the US.
The UK can stimulate investment in clean energy development and grow the economy by lowering the base rate to zero per cent for clean energy investors.
This would give the UK a real competitive edge in the global market and lead to the creation of new projects that can be delivered, new companies and new jobs.
It will also directly lower inflation by investment in the sector that has been the main contributor – ultimately decoupling economic growth from fossil fuels and providing long-term price security.
This strategy provides an immediate incentive for businesses to invest in the UK, ensuring rapid expansion and mobilisation of funds.
Allow direct investment into the grid
Our energy grid relies on old, outdated infrastructure designed for large fossil fuel power plants, concentrated at single-point locations. Decades of underinvestment have made the grid unable to support our much-needed, decentralised renewable energy systems – and modernising this now requires large-scale, immediate expansion.
The construction of new electricity transmission sub-stations is essential to carry the energy generated to where it is consumed. Under the current system, it can take up to 13 years to develop this essential new infrastructure, with grid upgrade costs passed on to consumers through their energy bills. Presently, only National Grid Electricity Transmission (NGET) can construct new transmission sub-stations, which is preventing multi £bn private investment in the UK.
Enabling private energy developers like NatPower UK to invest directly themselves in this grid infrastructure would save consumers hundreds of millions of pounds annually, lowering their energy costs, and accelerating essential grid upgrades by delivering in half the time it currently takes NGET.
Further, since offshore wind farms are already permitted to develop new transmission sub-stations, this policy change would simply require a modification to existing Ofgem regulations. Offering a swift solution to a significant issue, with very large positive impacts.
Digitalise the grid
The UK’s grid infrastructure is overseen by monopolies of distributed network operators (DNOs) and NGET, that manage our energy system. Currently, they are the only ones able to deliver new grid infrastructure to support clean energy generation.
As a result, there are more than £200 billion worth of renewable projects waiting in the grid connection queue. Some new solar and wind sites are currently waiting up to 15 years to have their project connected. due to a lack of grid capacity and investment in the system.
Expanding the role of independent distributed network operators (IDNOs) and enabling independent transmission network operators (ITNOs) to participate, will accelerate development, lower energy costs and expedite energy transition project completion.
By bringing more players into the energy market, we can drive innovation into our energy system. For example, we can create the Internet of Energy, which would upgrade and automate our electricity infrastructure, allowing energy production to become completely digitised.
Allowing private companies to build and operate various parts of the network simultaneously will create new markets, unlocking additional investment and helping the UK develop the clean energy grid of the future.
Localise energy pricing
The transition to decentralised renewable energy sources requires pricing mechanisms that reflect the complexities of today’s energy system.
We’ve seen electricity prices determined by overall supply and demand, managed in 30-minute intervals, for decades. Switching to nodal pricing, which considers real-time, local demand, could lead to more efficient use of clean energy sources, support strategic grid expansion, and incentivise the development of assets where they should be.
Nodal pricing can also improve grid stability and reliability by accurately reflecting local conditions, reducing the risk of regional blackouts.
Redesigning the grid to accelerate growth
There is no greater economic opportunity today than advancing a modern, clean energy system. Doing so will unlock benefits for all, from thousands of new jobs to reduced energy prices, to decoupling our economy from foreign fossil fuels, where the UK is currently over-exposed to the price of European gas, as the Ukraine war has highlighted. The conditions have never been more favourable for the UK to attract investment and allow players to drive innovation for our energy transition.
We have the tools to reform the energy grid in line with the renewable energy revolution. Now it’s a matter of breaking grid monopolies and levelling the playing field. Redesigning the grid’s rules can supercharge the transition, making the UK the most attractive place internationally to invest in clean energy.
About the author
John Sturman is managing director of NatPower UK, the largest clean energy development programme in the UK, aiming tointegrate large-scale smart clean energy generation and distribution with large scale intermittent clean energy demand.
