Why the UK needs to supercharge its clean energy power grid spending
The UK is at serious risk of missing its Net Zero targets, because even though we should be able to generate enough renewable power by 2050, we may not be able to plug it into the homes and businesses that need it.
It is generally accepted that a Net Zero future is one based on renewable energy, and a renewable future means an electric future. Wind turbines and solar panels produce electricity, and the more electricity we consume directly (rather than inefficiently converting it into, say, Hydrogen), the cheaper, more secure, and effective our energy system will be. At the same time, most forecasts suggest a huge rise in demand for electricity such that by 2050 we will need to double the amount of electric power in our system. That all means we need to undertake a generational endeavour of national and global importance, to build the infrastructure needed for Net Zero.
"…we need to undertake a generational endeavour of national and global importance, to build the infrastructure needed for Net Zero."
Here in the UK, we are pretty good at building and generating renewable power, particularly from wind. In 2022, 40% of the UK's electricity came from renewables. This was driven largely by wind - the Great British weather may not bless us with year-round sunshine, but it certainly is windy. UK wind production peaked at over 55% of our total electricity in parts of January 2023, and we have the world’s largest offshore windfarm at Hornsea 2. We also have another 86GW in the pipeline, which makes up 61% of the global pipeline for offshore wind. Most importantly, the cost to construct these windfarms continues to fall, despite the volatility in global supply chains.
But the power generated by all these windfarms must be transported to where it is needed, and plugging in the renewable energy is where the problem lies. National Grid ESO predicts that payments to generators for power they can’t connect to the grid could reach £2.3bn over the next two years. That is a staggering amount of power wasted already, at a time when we have connected only 20% of the renewable generation capacity that we will need in 2050.
The electricity grid requires major upgrades to be fit for purpose in the future
There are two fundamental issues with our electricity grid. Firstly, it was not designed to operate at this scale and with such distributed sources of generation. Major upgrades are needed to the high-voltage transmission network to be able to connect thousands wind farms to the grid. At the same time, the local Distribution networks that previously sent power in just one direction, now need to deal with the millions of domestic and commercial solar generation and battery storage installations, potential vehicle-to-grid energy flows and more. Secondly, we prefer to live and work in the least windy parts of the country. Most of our renewable power will be generated in the north and islands off Scotland, yet the greatest demand will be in England and the Southeast, several hundred kilometres away. The current high-voltage grid cannot move power over those distances without significant transmission losses.
"… most of our renewable power will be generated in the north and islands off Scotland, yet the greatest demand will be in England and the Southeast, several hundred kilometres away."
But all is not lost. New advances in High Voltage Direct Current (HVDC) technology enable long-range transmission of lots of power at high voltage. The Eastern Link portfolio of projects will connect Scotland to England via the North Sea, with several huge 2GW connections planned to stretch over hundreds of kilometers. Given transmission losses of around just 3%, HVDC opens up not just the ability to connect Scottish wind power to England’s industrial heartlands and cities, but to link wind assets deeper into the North Sea, or long-range interconnectors such as the staggering X-Links project to Morocco, that can contribute to the resilience of the British energy mix.
So, for all the talk of gigafactories, Tesla's, heat pumps and a rainbow menu of hydrogen, our ability to reach Net Zero will really be determined by thousands of kilometres of cables running over our hills, deep into the ground, and under the sea. In the next seven years, we need to build infrastructure on a scale not seen since the grid was first created. It is a staggering investment and one of the great national endeavours of our generation.
The UK is in a global race to secure its NetZero Infrastructure
This is not a uniquely British challenge. Virtually every country on the planet is attempting the same gigantic task, at the same time. The world has only a limited amount of the raw materials (such as copper and aluminium) that go into cabling and global manufacturing capacity is a long way from being able to meet demand. Countries with deep pockets and efficient decision-making are rapidly snapping up production slots long into the future. Interventionist economies such as China have been far ahead of the West for some time, although since the Inflation Reduction Act the USA is now catching up and the EU is not far behind.
"... the global race for cable and key grid materials is the greatest challenge, and it is needlessly exacerbated by our piecemeal approach to the supply chain."
The UK, by contrast, risks falling asleep at the wheel and giving away its position as a global leader in renewable energy. The government must be bold enough to lead on this. The UK’s energy future is far too complex and uncertain to simply rely on market mechanisms and hope that private companies will figure it out. At the moment we aren’t clear enough on what needs to be built and where, approvals to do so take far too long, and we struggle to compete to buy the materials and services we need.
The global race for cable and key grid materials is the greatest challenge, and it is needlessly exacerbated by our piecemeal approach to the supply chain. Currently, each network operator is expected to initiate the projects required in its territory, to take those projects through approvals and place contracts separately. Even our biggest grid projects so far are a mere £2-3bn, which in the world of national infrastructure is dwarfed by the sums offered even by close neighbours such as Germany. We are in an extreme version of a seller’s market and our approach not only diminishes the impact of our spending power, but dramatically increases the cost of sale for suppliers. This reduces the attractiveness of the UK market, as our small projects become barely worth the while for major suppliers who can easily offer production slots elsewhere for decades to come.
Why we need a joined up, national approach to the grid supply chain
The single biggest thing we could do to solve this would be to take a collective approach to purchasing. We may not be quite on the scale of the US or the EU, but collectively our grid infrastructure needs still represent a sizeable amount of spending and we have the potential to bring real bargaining power in the market. There is no reason that the UK couldn’t place a collective national order and secure the thousands of kilometres of cable production capacity needed for the decades to come. Those orders could then be the given out to the individual network operators as their projects come through, safe in the knowledge that this will maximise value both in the short term and by expediting our ability to consume low-cost renewable energy.
"... collectively our grid infrastructure needs still represent a sizeable amount of spending and we have the potential to bring real bargaining power in the market."
That could be done either by the network operators collaboratively and with Ofgem’s backing, or directly by the government. Not only would this help to alleviate the supply chain constraints, but it would necessitate a standardised design and specification, driving efficiency and simplicity into construction which would further bring down costs. That is the sort deliberate and strategic forward thinking that the UK desperately needs.
Achieving Net Zero is question of national endeavour, perhaps the greatest challenge of our generation. We may be a small island, but we have some of the richest renewable resources to exploit, and the best expertise in the world with which to do it. With just a little boldness of leadership, integrated thinking and collective will, we can succeed in the global race for the grid.
Ben is a Partner at Oaklin, focused on leading our exceptional teams working to help our clients deliver the Energy Transition, Net Zero, and the power system of the future. He provides strategic advice to major businesses, bringing deep experience of helping large organisations to deliver complex, technology enabled transformation. His experiences range from initial strategy definition through to leading programme mobilisation and hands-on delivery.
Ben has worked with a range of major Renewables and Energy Utilities clients leading business-critical change programmes and launching market disrupting technology to customers.
Ben holds a BA (Hons) degree in History from the University of Warwick, during which he commissioned as an officer in the Territorial Army and spent a year studying in Spain. He is also a keen musician, playing the trumpet in a local Big Band, and is one of the very few Management Consultants who can claim to have performed on the Pyramid Stage at the Glastonbury Festival.
-  Future Energy Scenarios 2023, National Grid ESO
-  https://www.nationalgrid.com/stories/energy-explained/how-much-uks-energy-renewable
-  https://www.energydashboard.co.uk/historical
-  https://www.renewableuk.com/news/599739/Offshore-wind-pipeline-surges-to-86-gigawatts-boosting-UKs-energy-independence.htm
-  https://data.nationalgrideso.com/constraint-management/24-months-ahead-constraint-cost-forecast/r/24_months_ahead_constraint_cost_forecast
-  https://www.crowncommercial.gov.uk/news/make-way-for-renewable-energy-generation
-  https://xlinks.co/morocco-uk-power-project/