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Examination of witness
Nick Winser.
Q64 The Chairman: Good morning. This is the Industry and Regulators Committee of the House of Lords. This is a public meeting on the energy grid and grid connections. Our witness this morning is Nick Winser, who has several roles: as an independent adviser to Ministers; on the National Infrastructure Commission; and as a member of the Government’s clean power advisory commission. So you, Nick, have several different hats. Can you tell us how they come together in terms of the energy grid policy and regulation, and where you are coming from when we ask you very specific questions about some of these issues?
Nick Winser: Yes, I would be delighted. Good morning, everybody. It is lovely to be here. My career has been spent in energy transport; I suppose that is the best thing to say. I am an electrical engineer and have worked in the industry for National Grid and other places in my career, including as a control engineer at the beginning of my career, as a system planner for electricity and, subsequently, running the gas systems, too. In October 2023, I advised the Government on how to accelerate the building of electricity transmission infrastructure, and the Government accepted all the recommendations of that report. Now I serve on the National Infrastructure Commission (NIC) as an energy commissioner and, as you say, I advise Ofgem. I was also recently appointed to the Clean Power 2030 Advisory Commission.
The Chairman: So, over the time you have been working in the industry, you have seen some very significant changes. People have said that both the review that you carried out in 2023 and what the Government are now proposing are challenging in terms of the targets that have been set. Can you give us an idea of what progress you think has been made and what the most significant barriers are to achieving the kind of targets that the Government have been setting?
Nick Winser: Yes. The report that I did, assisted by the Energy Systems Catapult, was published in 2023 and considered transmission. I am going to answer this in two parts: on the transmission system, or the high-voltage system; and on the distribution system, which is the low-voltage system going to homes and businesses.
On the transmission report specifically, the recommendations were around a greater degree of strategic spatial planning. I emphasise “spatial” because, of course, transporting energy is all about what is happening—where generation is going to be and where demand is going to be. It is a much more strategic approach to thinking about the future, leading to anticipatory investment rather than waiting for signals from customers of the transmission system then trying to catch up. It is certainly fair to say that transmission is behind the curve in terms of what needs to be built. We are scrambling to catch up. My report was an attempt to find ways of catching up: the introduction of strategic planning; reform to regulation; addressing the planning system, in particular skills and the supply chain; and coming forward with, I do not know, 18 or 19 recommendations on all of those things.
Separately and subsequently, the Treasury asked the National Infrastructure Commission to report on the distribution system, as I am sure you know. We have just published that. It is quite different in many ways because the planning system in particular affects the buildout of distribution differently. It is fair to say, I think, that, on the distribution system, we still have time to accelerate in a calm and sensible way, rather than needing to pick up pace suddenly, as we are on transmission. You will have seen the Climate Change Committee’s report of last week on the seventh carbon budget. It really says that the economy is going to electrify; that reflects exactly the second national infrastructure assessment from the National Infrastructure Commission in 2023. It had very much the same path forward, which involved a renewable heavy system with a lot of deployment of electric vehicles and heat pumps, and seeing that as a way of both addressing our need to hit the carbon budgets and driving down costs for customers.
The distribution report does talk about anticipatory spend, but from the basis that a gentler but sustained increase in investment is needed. There are some smaller changes to planning to facilitate that, as well as some changes to regulation. The same points apply to supply chain and skills.
The Chairman: On transmission, what is your main concern about the barriers to making the kind of progress we need at the speed we need?
Nick Winser: The progress on implementing the transmission action plan—it was agreed when the recommendations of my report were accepted by the Chancellor in 2023—is all going ahead, actually. Obviously, I am very pleased and satisfied with that.
The main barriers now are around the need to hit Clean Power 2030. There is pretty limited time. My report focused on reducing the amount of time to build major transmission infrastructure from a notional 14 years to seven years. I was confident that we came up with a way of halving that; that was all good. Of course, we have five years to get to 2030. It is the case, reassuringly, that quite a lot of that infrastructure is already being built and that there has already been quite a lot of action. Nevertheless, we need to move rapidly through the planning system. The national policy statements have now been brought up to date—that is a much better bedrock for all of this—to address community benefits, as I suggested in my report, but there is still some work to do there. The funding for statutory consultees is an important part of all this, as is getting a longer view of the supply chain and longer-term commitments from the supply chain, which is very strained. Addressing skills will be very important.
Q65 Baroness Valentine: My question is about the connections queue. What is your view of the National Energy System Operator’s proposals to reform the connection queue? Will those changes be sufficient to ensure that projects necessary to meet the clean power target will be able to connect to the energy grid in a timely manner?
Nick Winser: The proposals that have come forward are good. As of December last year, there were, I think, 765 gigawatts in the transmission queue. I am sure that members of the committee will know that the peak demand for electricity in this country is about 60 or 70 gigawatts—probably 60 these days. That is obviously a very big queue of renewables and storage, which will be incredibly important, but we could not possibly need that amount to get to our target, so the nature of how that queue has built up needs to be addressed and therefore the proposals that have come forward from NESO (National Energy Systems Operator) are good proposals to apply.
In a slightly different context, I suggested a strategic spatial view of that queue, looking at it specifically from the point of view of Clean Power 2030 and, essentially, picking from the queue mature projects that are ready or a long way advanced and that fit the relatively narrow tramlines that have been set for hitting Clean Power 2030. Of course it is a change to the industry, and that can be unsettling to people who were already in the queue, but we have to do something about a stack of applications that is 750-odd gigawatts tall. We have to do something to rationalise it, and I think these are very good plans.
Baroness Valentine: How important is it that those reforms are implemented quickly and without further disruption by legal challenges to any decision to deprioritise projects in the queue? Should the Government legislate to underpin these reforms and clarify how any challenges will be met?
Nick Winser: It is very important that we make rapid progress in implementing the reforms that NESO has laid out and referenced in the Clean Power 2030 report. I am an electrical engineer rather than a lawyer, so I will leave others to judge the precision of the legal position and the possibility of challenge. But what I can say is that there is no time to be lost. We need to implement these reforms in a deliberate and careful but speedy way, because time is short to 2030. As you would expect, given my role on the commission, I am a huge fan of the objective to get to clean power by 2030, and I am very happy to talk about that. I think that is a very laudable objective which can really speed us through the transition.
Q66 Lord Udny-Lister: I want to take you back to your first comments about planning. Could you help us by telling us about the barriers that the planning system is imposing on you or on the industry? Secondly, what do you think of the Government’s proposals to improve the planning system? Do you think they go far enough?
Nick Winser: I will address this in two parts—first, from the point of view of transmission, because that is the most pressing issue. Personally, I am a fan of the Planning Act 2008; it was a good piece of legislation. At its heart, this is about balancing the rights of individuals and communities to be heard and listened to with achieving societal goals, and the Planning Act 2008 was a pretty good go at that.
Where things did not go so well was in allowing it to get a bit rusty and, in particular, the failure to update the national policy statements (NPSs) to keep in line with government policy on clean power sources and the development of the energy system. That led to quite a lot of the problems in the planning system. The fact that there have been updates to those NPSs has already helped a lot. We are a lot further forward than when my report was published, but there are still other issues.
Getting through the Planning Inspectorate’s timescale in a careful and well-considered but speedy way is still a challenge; an increasing set of projects are needed to go through that. Other issues include the need for statutory consultees to play their role—and be allowed to play their role properly—many of whom are underresourced. The need to engage absolutely properly with communities and make sure that their concerns are fully heard and responded to in a sensible way means that these can be laborious processes. The problems around a lack of clear definition of pre-application consultation are well documented and have been well discussed. It is very important to make it absolutely clear what is required and then allow everybody to move on and go, essentially, with the democratic will to build whatever is recommended by the Planning Inspectorate.
There is still work to be done to get enough people and engagement with the supply chain, but that comes after the planning phase. I still believe that community benefits would be a useful part of the environment, and compulsory community benefits would probably be important. I know that the Planning and Infrastructure Bill will address some of these issues, and that will be important. Essentially, with the changes that are likely to come through in the Planning and Infrastructure Bill, the planning system can probably work well if it is resourced properly through the Planning Inspectorate and statutory consultees and with the updates to the NPSs. There will probably be some clarifications about how to deal with judicial review and some of the details about the process.
Lord Udny-Lister: I have a supplementary question, but I also want to follow up on something you have just said, if I may. You have slightly given me the same line that the Government has always given on planning: the reforms will move it forward and speed it up. Those of us who have ever been involved in the planning system know that that does not happen, because we know that local authorities are not very keen on giving planning permission for something that people object to. We know that it then goes to the planning appeals system and that people are lucky if that gets round to looking at it within about 12 months. Chuck in judicial review and a few other bits, and you are on to very long timelines. Do you feel that anything the Government have said so far will actually speed that up, so that local authorities might get round to saying yes, or, if they will not do that, at least get plans into the planning appeal system with a fast turnaround?
Nick Winser: Yes. I think the introduction of the Strategic Spatial Energy Plan is very important in all this because quite often communities understandably look at a proposal of a new connection and cannot see the broader context. They ask understandable questions such as “Why can’t it go somewhere else?” or “Why can’t it go under the sea?”. If we had a Strategic Spatial Energy Plan designated as part of the planning system—a public document that had some democratic legitimacy in how it was being designated under the planning legislation—the Planning Inspectorate could look at that and say, “We’ve got an approved high-level map of how we are going to develop the system, and this particular proposal fits in to that overview”.
That would not only allow the Planning Inspectorate and statutory consultees to see that something is absolutely in line with the overall strategic plan but allow people, to quite a degree, to see the context, understand how it all fits together and feel that they can see the sense in something, even if, at the local level, it may not always be exactly what they would want to see.
If we ally that with community benefits—that is absolutely right—that will potentially bring the benefits of clean power to local communities earlier, we can, to go to your point, do an awful lot to make individuals, communities and local authorities happier, in that they can see the context, they are being heard and they see that this is a rational process.
Lord Udny-Lister: A supplementary that I wanted to ask was more about distribution. What about the use of permitted development rights? Could those be used far more? Could far more just avoid the planning system completely, and is further reform needed in that area?
Nick Winser: Yes. The recent distribution report from the National Infrastructure Commission talked about permitted development. The detail of it is quite minute but let me pick out a couple of examples. We think that it should be made clear that, if you want to change an overhead line set of poles from two conductors to three conductors but it will be broadly of the same environmental and visual characteristic, that should be covered by permitted development. Of course, we are now talking about small substations at the distribution level, but the DNOs (Distribution Network Operators) should be able to expand the distribution substations within permitted development. We specify some sizes that are currently the limits, but they should be given more freedom to do that. We also talk about land rights and access rights as part of that. We also believe that the National Planning Policy Framework should be amended to pick out clearly the need to move those distribution investments forward.
Q67 Viscount Chandos: Can I pick you up on community benefits? You favour them, probably as compulsory. Is it not an indictment of the companies in the sector that it would need to be compulsory?
Nick Winser: The commission certainly recommended the consideration that they should be compulsory but not really from the point of view of saying, “The sector won’t do this unless”. The commission’s recommendation was more about the importance of consistency. We are trying to strike quite a difficult balance here; I want to be completely open about this. We think that there is absolutely a role for local communities to advocate for the sort of benefits that they might have in their area, but, at the same time, we think that it is important that they fit into a broader framework so that, as you get multiple transmission projects—in this case—people can look across the swathe of them and see that there is fairness and equal treatment. In a world where all the assets are different from each other and each community would probably want a different set of benefits, making them compulsory would at least give a framework for bringing those things together.
Viscount Chandos: But that compulsion also specifies the type of benefit—that is, the discount on the bill or whatever investment is made in the community.
Nick Winser: Yes. The commission really favours a menu. I understand that there is some important detail to be worked out in terms of how you finesse a menu and local choice with a degree of compulsory application. We have not worked through that but the essence of it is that we believe that benefits are important and very legitimate; that they should be universally applied, particularly across those types of assets where you have impacts on visual amenity; and that they should represent real value to communities.
Viscount Chandos: When you talk about the different types of assets, does that include wind and solar as well as transmission?
Nick Winser: Neither my report nor the commission—in its views not on distribution but on the planning system—addressed generation assets. The comments were about investment in linear assets such as the electricity transmission system. I am pretty sure that that was the context of the commission’s comments; it certainly was the context of mine. Of course, other processes on generation are already in play. I do not have an answer for you on whether they should all be corralled into one process, but my own view is that, for both of those types of assets—generation and transmission—there is certainly a strong case for engagement with communities so that they see the benefit of the clean energy system earlier.
Viscount Chandos: Surely it needs to be joined up to gain local support—that is, village X has a wind farm on its site; village Y has a series of pylons. People communicate. Are they not going to feel that there should be a consistent tariff, particularly if it is compulsory?
Nick Winser: I am not sure that I quite get to a consistent tariff. I very much acknowledge your point that a wind turbine may look much like a transmission tariff from this point of view, so there should be some degree of consistency between those types of assets, but one issue holding me back from wholeheartedly accepting your point is that there are a whole variety of generation assets, such as gas-fired, CCGT and nuclear power stations. I do not want to give the impression that I think you can easily join up all this stuff, but it is a good point that we should try to see which assets are equivalent and try to make sure both that it looks like a sensible and fair process and that the benefits that flow have some rationale to them. That is a good point.
In essence, generation assets are mainly on a site, while transmission assets are linear. Therefore, although generation assets bring benefits such as job creation, one cannot say that for transmission assets, which may well start 80 kilometres away and finish another 80 kilometres past you. They do not bring the benefits of jobs and local value creation that a generation asset would.
Q68 Lord Best: I want to dig a bit deeper on the delays that the planning system currently incurs. You said that there is an expected increase in applications coming down the track and that we do not have a system that is processing speedily enough. This is partly, of course, to do with the fact that we have cut down the size of planning departments up and down the country. They are operating at about 60% of the level of five years ago, I think. There are not enough people. To what extent is the answer to increase the fees that are paid for the planning system—or, indeed, to put in more public money, which might not be a very palatable approach? The fees are going up. There are increases in fees for planning consent and in work for applications. They will be index-linked but will this be enough? This is not full cost recovery yet. Would that be the way to ensure that we have enough properly qualified planners?
Nick Winser: It is part of the solution. You have absolutely called out the two possible roads to addressing this. I think that both are valuable. Increasing the fees is a sensible thing to address it, partly because that obviously responds to the size of the queue. Certainly, it is about getting the Planning Inspectorate in a position. It has already recruited lots of new inspectors, as I am sure you know. That is really good news, but increasing the fees from applicants is an important part of it. In some senses, it allows the resource to be focused on areas where there is a lot of development.
Looking forward, you will see another one of the recommendations in these reports. It concerns local energy system studies and local energy system strategic planning, which will need resource from all local authorities and statutory consultees.
My own view is that a balance between more public money that increases the overall level of capability in local authorities and other statutory consultees, topped up by the use of specific fees from projects, is almost certainly the right blend. We have got to get that blend right. The increase in public money would usefully increase the capability right across the geography, but the use of fees would then bring in more focused money in areas where there is a particular need for a lot of consideration of local schemes.
Lord Best: It needs the fees to be ring-fenced for planning purposes and not to go into the coffers of local authorities for other pressing demands. I guess that is an important part of how you do it.
Nick Winser: That is a great point. Not only should the fees going in be ring-fenced, they should also be accompanied by clear responsibilities to have a resource and to engage in a timely way with the processes that we need. Ring-fenced money and responsibilities that line up and are supported by fees on individual projects seems to me to be the right blend of things that will help us through that problem.
Lord Best: I want now to dig a little deeper on the other aspect: the system of land and access rights and consents for network infrastructure. To what extent is it going to be possible to have voluntary codes of conduct and codes of practice with proper resolution through mediation or arbitration? Are we going to need to be stronger in determining in advance the requirements leading to compulsory purchase, if necessary?
Nick Winser: I do not think I see a change from the current system. Of course, most wayleaves are agreed on a voluntary basis with recourse to the courts if, in this case, a development consent order (DCO) is granted where a voluntary wayleave cannot be agreed. There should still be, front and centre in the process, an opportunity for a voluntary agreement to be reached with landowners; that has been our position for many years, actually.
The thing that will cause me more difficulty—indeed, it does cause me difficulties—is when a voluntary wayleave cannot be agreed. If that implies a big delay in going through the processes of getting a compulsory wayleave, it is clearly a problem. Delay haunts me. We are in 2025. We are trying to accelerate transmission build for hitting the next objective in 2030. We need to be able to work in a sensible, reasonable and considerate way through that process but also to bring it to a resolution.
Lord Best: We should, but will that happen without a bit more central dirigisme?
Nick Winser: My instinct and my feeling—I do not have research on this and none of these reports really dug into that level of detail—is that it probably can. It seems to me that the set of things we have for individual access on a particular right of way is probably still a useful, workable process if we have enough resource and enough access to get into the process of compulsory wayleaves where voluntary ones cannot be struck.
The delays that we have seen so far have not really been about that. In fact, a lot of the delays that we have seen on DCOs have—this comes right back to the debate—been about the lack of keeping the NPSs up to date with national energy policy. It may be that, as we solve that, we uncover other problems, but that would be my instinct on this.
The Chairman: That is the point of Baroness Coffey’s question, I think.
Q69 Baroness Coffey: Mr Winser, I am conscious that the Strategic Spatial Energy Plan is a good step forward but will not be ready until 2026. Meanwhile, there is frustration in a lot of communities—East Suffolk is where I know—about what they believe to be a lack of transparency and openness. There is quite a lot of finger-pointing going on between the developer, Ofgem and what is now NESO. There is still a belief that only limited, redacted bits of information are shared, which they find very frustrating.
You mentioned the need to engage with communities. Can you see a role for you—or other parts of Government, potentially—to try to have much more of an open book? Otherwise, communities will be terribly frustrated. They believe that a decision has been made and that that is all that is going to happen, regardless.
Nick Winser: The existing institutions—the TOs (transmission operators); NESO, which is doing the work on the SSEP; and the Planning Inspectorate, which looks at the overall application—are the right institutions to do that. We have the right institutional architecture for it. I share the sense of, “Can’t we have the SSEP today?” As you might imagine, having very much advocated for that, I have questioned—
Baroness Coffey: I appreciate that we are not going to. It is about the transparency.
Nick Winser: I understand that. Having questioned that strongly, I am persuaded that it is sensible to take a robust approach to developing the SSEP. I understand that that takes time, particularly with the development of the Regional Energy Strategic Plans, but there are other documents out there. I believe absolutely in complete transparency. Other documents are already helping with that, such as the Clean Power 2030 plan and NESO’s supporting publication. The Centralised Strategic Network Plan that NESO has provided for getting to 2035 gives a lot of backdrop to the development of those plans, so the transparency of the overall picture is increasing dramatically already.
Those things were not out there in 2023, when I reported, but they are now in the public domain. They sort of filled the gap before we get the first true SSEP in 2026; given the existence of those documents, trying to back into the timescales of 2025 is probably not a sensible thing. I have said on many public platforms, though, that we need to be careful not to make the perfect the enemy of the good on system planning. We have, in a completely different environment, managed without an overall network plan for the years ahead for a long time. Now that we have found that we need it, there is a lot of benefit that could be drawn from getting on with it and getting it out there to communities and individuals.
By the way, I believe that it is absolutely possible for the parties involved in this to make that accessible to communities and individuals as well as the communication that people will get on particular schemes.
Q70 Baroness Harding of Winscombe: My question follows on from that very neatly. You have mentioned—several times now—the importance of the Strategic Spatial Energy Plan. What will the SSEP, as well as the Centralised Strategic Network Plan, need to provide in order to be a success?
Nick Winser: They provide two things, in overview. First and foremost, the SSEP provides the opportunity for anticipatory spend. That has become absolutely critical. When the system was not evolving at speed to a completely different energy system, reacting to applications to connect merely one by one was okay, but those days are completely gone. There is a major transformation of our energy system—one that I think is very good because it will lead to lower customer bills and will help us hit our carbon budgets—but the ability to have the SSEP running in a variety of timescales allows anticipatory spend, which we will need.
The second thing that it provides comes back to Baroness Coffey’s point about giving transparency to communities and individuals around the backdrop to what is going on and why all of this makes sense. It takes us away from just having an individual application for a particular route through the land, to being able to see it in the view of the total transformation of our energy system and the benefits that this will bring to the country. It is a key part of allowing communities and individuals to feel comfortable with what is being proposed, if possible. It is also a critical input for the Planning Inspectorate so that it does not have to answer, for every application, every question on a whole array of issues, from “Is this man-made climate change or not?” right through to whether a particular pylon goes on one side of a farm gate or the other.
Getting the NPSs right, supported by a spatial plan, allows you to get through all of that stuff a lot quicker. You can then focus on the really significant discussions that should be had with local communities about the local environment and visual amenity.
Baroness Harding of Winscombe: How do you integrate those plans with the planning system and regulatory approvals so that you avoid the second-guessing you are worried about? Also, how do you ensure that you get greater clarity on how these plans interact with other strategic spatial plans, such as the land use framework and the strategic plan for transport? It all sounds great in theory. My worry is that we have so many different overlapping strategic plans. How does this actually speed things up, rather than just adding a bit more bureaucracy?
Nick Winser: I very much share that concern, in terms of the way you finished that question. We have to do this in as agile and pragmatic a way as we can, but those things are very valuable. On how you slot them into the planning system, my report is clear that they should be designated as part of the planning system so that they have legitimacy from Parliament to allow the Planning Inspectorate to say, “Yes, not only have we got the NPSs, but we can see that the next level of detail is a spatial plan involving a new route between A and B”. That is the first part of your question.
The second part was about regulatory approvals. I proposed that, instead of Ofgem and the Planning Inspectorate assessing each project in terms of whether it solves a legitimate capacity need on a particular boundary—of course, that adds to the timescale—Ofgem should regulate the process of producing the SSEP, so that it sits not sequentially but in parallel to the SSEP and so that Ofgem is blessing the production of this plan all the time and does not, therefore, need an ad hoc process for each DCO application or regulatory application. That would save a lot of time by taking Ofgem out of the critical path; Ofgem is sympathetic to that, and there is progress on getting to that point.
On your last point, I will switch hats and go back to the National Infrastructure Commission’s view. The commission broadly believes that strategic spatial planning is good in multiple infrastructure sectors. Clearly, those things interact. For example, housing developments interacts with transport, the need for digital rollout and the need for electricity, particularly in a world with heavy use of heat pumps and electric cars. Joining all of this up is important. I do not shy away from that; I think that this is all very worthy.
To address your point about bureaucracy, we just have to steel ourselves to make sure that the way in which we join all of this up is proportionate and sensible, given that we have managed without any of it for quite a long time. We are suffering some of the disadvantages of that now, but making things as proportionate and agile as possible—and not seeking the perfect—is very important in all this. All we can do is give the right signals and rely on management to act on that principle of making sure that it is proportionate and that it does not become overly bureaucratic.
Baroness Harding of Winscombe: I come from the digital world so, forgive me, but so much of what is in this sector does not look agile at all. Given the timescales, what do “agile” and “proportionate” look like in practice? What should we be challenging the sector to do to make sure that those things come about?
Nick Winser: Let me give you an example because I am not sure that I can answer that comprehensively and at a high level. Part of this is working with the regional energy strategic planning process that is being set up, which will become very important in the future. At one level, you could have a very detailed analysis of every street and try to integrate that into a broader national picture. At another level, you could engage, as I think we should, with local energy plans, looking in a zonal way at how we expect the local environment to develop. We know that there is a process now of doing zoning for domestic heat, which is important. Some areas will have waste heat that can be used, or you might be able to use a river source heat pump or the waste heat from data centres to heat houses—a fantastic opportunity. Some areas will be best addressed through heat networks, and some through the application of heat pumps. There will also be housing developments in local plans and plans for developments to industry and commerce.
That sounds like a good level of engagement to be able to say, through those local plans, “This is the broad shape of how we think our area will develop”. That can then go into the process of being blended in and matching the national process. The detailed network studies can then be done at the right level, which is where there are a lot of electrical engineers who have planning tools and skills. Let us make sure that, as we do it, we ask for the right set of stuff to be done at each level, rather than everybody trying to do everything.
Baroness Harding of Winscombe: That is very helpful—thank you.
Q71 Baroness Drake: Good morning. I will stay on the subject of the Regional Energy Strategic Plan (RESP), which you started to introduce in your answer to Baroness Harding. What would Regional Strategic Energy Plans need to deliver to be considered a success? What are the key points?
Nick Winser: The first thing is to deliver the local view that we have just discussed—to deliver, at a high level, plans for how the locality hopes to develop, to meet the needs of communities better and, then, to give an input into multiple strategic plans across a variety of sectors.
Secondly, we need to give communities a real sense that they are being involved in the process and that they have some agency in how their local area is developed, which is an enormous prize. We must build on the democratic legitimacy at not just a national level but a local level to allow that to happen.
Thirdly, I feel guilty that we have not so far mentioned the efficiency of the system. Getting that bottom-up view allows you to start to size the network appropriately and to think cleverly about the energy system of the future. The energy system looks like it needs a refresh in terms of how we think about, in particular, flex and the digital connectivity of the energy system. There is a lot of money to be saved by thinking about how local plans and local engagement on flex and the digitisation of the energy system lead to the saving of a significant amount of capital spend and operational spend.
Baroness Drake: Given this element of partly building up from the bottom, which raises the issue of the extent to which these regional plans are hard-wired into the wider planning network, to what extent is it possible to plan strategically the distribution network, given its greater complexity and more localised nature? How realistic is that?
Nick Winser: The National Infrastructure Commission’s report touched on this and said quite clearly that, although you can absolutely do this at the transmission level—there are a small-ish, although not that small, number of specific plans, such as planning the motorway and that sort of thing, where you can say, “We’re going to need capacity to go from there to there”; that is quite precise—you cannot really do it at the distribution level because we do not have the detail of how many heat pumps, electric vehicle chargers, small solar installations or small onshore wind farm installations that we are going to get or where they will be. So there is a great deal more uncertainty.
The idea from the commission on that is that it is not as decisive as the transmission plan—rightly; I would defend that—but it works with the RESPs, which will develop the detail of this over time. What the commission is clearly saying is that we will need more distribution network and that the regulators and distribution companies will need to get serious about this and set a flight path of expenditure; that will be flexed as we understand better how the rollout of renewables, heat pumps and electric vehicles is going, and as we develop our own view of how best to optimise the system with flex, digitalisation and so on. It is strategic in the sense of setting a trajectory—plans show that electricity demand will double by 2050—but it does not define the detail. It allows the detail to come forward as it is known and to favour a street or community where we see particularly fast progress on decarbonisation.
Baroness Drake: Are you saying that the RESP cannot in and of itself provide the clear needs case for strategic investment at the distribution level—that is, it can only contribute to that?
Nick Winser: I think that it can provide a needs case, but that probably depends on the voltage. As you come down the system, it is able to provide less and less for a strategic case, but the local plans absolutely can say, “We see the future in this area as being a set of renewable investments”. We see communities investing in heat pumps, electric vehicle chargers and things such as data centres. Just imagine the power that is now being taken by the motorway service stations, where you drive in and you think, “Oh my goodness, this is a vision of the future”. A heavy chunk of electricity is going to these places.
Local plans can be very strategic on some of those big chunks as well as in another sense, to go right to the other end of the question. A lot of households, as we know, are looped: each household does not have its own feeder; there may be more than one house on a particular feeder. We can tackle that, which in some cases holds up the use of heat pumps or electric vehicle chargers. We can tackle that at a strategic level and say to the DNOs, “We expect you to work through those and unloop at this sort of process”, but, when it comes right down to an individual street or property, that needs to be decided with a greater degree of certainty on what is happening at that time.
Baroness Drake: If that is your view of what they can contribute, how can you hard-wire that into the higher-level strategic planning? How do you ensure that it does not get lost, that it is captured and that it really delivers on that input?
Nick Winser: NESO is doing work on this at the moment to define the types of input. The frequency of that input from the RESP plans is a very important topic because the speed of update will be important to the developing picture at a local level. However, the overall likely development of the energy system in a particular area as a whole can perhaps be defined on a less frequent basis because the local plan will have said, “Yes, we see an industrial or commercial zone being developed here”, or “Yes, we see data centres being developed here”. Those things have a slightly longer lead time, and the RESP can input them into the overall strategic plan.
To the extent that the detail is provided in shorter timescales, at the higher level, NESO would be well advised—it would do this, I am sure—to replace that lack of detail with some broader assumptions about how those things will develop. That is very much where the NIC has ended up in saying, “We can’t see the detail but we know the distribution system needs to get bigger”. Critically, in a world where we know the distribution system needs to get bigger, let us touch it once: let us make sure that, if we have to dig up a street, we put in enough new capacity so that we do not have to come and dig it up again in two years’ time.
The Chairman: I think that that resonates with everyone on a whole range of utilities.
Baroness Drake: I have a quick supplementary. The NIC said that Ofgem and NESO should develop structured ways for local authorities to input into RESPs, and recommended that the Government assess what capacity and support local authorities will need to engage meaningfully. What is your view as to how local authorities should or can be supported to engage with the development of RESPs, given their resource constraint? How do you avoid the postcode lottery of differing quality of input by local authorities into RESPs?
Nick Winser: Local authorities need to have the right expertise. I do not think that they need system planners who can run complex computer models of the energy system because lots of other people can do that, including NESO or the DNOs. However, they do need a mechanism for defining broadly the development of the area—including, strategically, the energy implications that would come from lots of new data centres or an industrial development here and a new housing estate there. They need ring-fenced resource with spatial planning skills that stop short of electrical engineering. There would be no harm in them having that but they are pretty constrained on resource, so they can rely on those plans feeding in and working in partnership with NESO and the DNOs to work out, given how they think an area is developing, what that means in energy terms and across the array of spatial plans.
Q72 Lord Teverson: You have mentioned efficiency quite a bit. One area that we have been looking at is saving having a grid at all by having the demand close to the supply, if you like, as well as regional or zonal pricing and all of that side—maybe even at the transmission level so that you have your data centre in Scotland or wherever you have an excess of wind power. I am interested in your views on that and whether those efficiencies are there.
At the distribution level, we now have a very distributed generation system. Because of the efficiency of solar panels, solar covers the whole of the country rather than the south-west, where I come from, where the sun shines the greatest. Is there any ability to match supply and demand in the distribution network a lot more cleverly than at the minute so that it never has to go up to the transmission level at all? I am interested in your thoughts around both of those areas.
Nick Winser: Starting at the end, the ability to match much more cleverly is worth an awful lot of money—certainly a lot of avoided expenditure. The NIC report on distribution said that we can invest 15% less than we would have done otherwise because of the assumption that we will have flex, digital connectivity and smart applications. In our estimation, that right there constitutes a saving of £7 billion by 2050.
Some people have challenged whether you can do even more and not have to invest in distribution. I would strongly dispute that. The amount of flexibility you should use at the distribution level is significant but we have to bear in mind the broader national balancing value of flex. The NIC said that £7 billion—that is 15% of expenditure on distribution—can be saved by sensible use of flex at the local level for investment. Let us imagine that we try to use fully all of that flex just locally; let us say 15% and multiply it by seven, so that we get up to £49 billion. Of course, that is not a sensible way of looking at it because, even then, you cannot avoid all this investment. However, given the estimates of what flex can deliver—that is, let us say, £20 billon or £30 billion by 2050, sensibly—we think that it is worth £250 billion used at the national level to enable us to balance the big picture of, “It’s not very windy or sunny today”, and to deal with those sorts of things and stories.
A key thing that the commission said is, “Let’s not tie up all of our flex by desperately trying to make the best of the distribution system and invest less there. Let’s use that sensibly and make sure that that flex can be used to balance the overall system, because that is a lot more valuable”. That is critical: it leads to a move away from the idea that has been in play over the last five to 10 years whereby you make sure that you use flex first before you build assets. We are saying that the slope is pretty steep, so use flex locally but make sure that we also build assets because we do not want to end up in the same position on distribution in which we have ended up on transmission, where we are racing to catch up.
Sorry, I have lost the thread of the first part of the question.
Lord Teverson: We were talking about putting data centres in Scotland and, at a transmission level, stopping the need for a grid connection at all, in a perfect world.
Nick Winser: It was a zonal pricing question.
Lord Teverson: Yes, basically.
Nick Winser: I would reflect straightaway that we have zonal pricing now. Zonal pricing tends to play in these sorts of conversations as if it is a completely binary thing. Of course, we have a wholesale market, where you have to add on the transmission tariffs, which are zonal. What we are talking about is whether to evolve those zonal signals forward, making them freer to change temporally—in time—or, more extremely, geographically. That is me trying to say, “Actually, this is a more nuanced debate than is sometimes placed in the newspapers”.
In that, we are very much trying to balance the benefits that might come from allowing a greater degree of freedom for those who own a price to move around with the serious issues in terms of maintaining the confidence of the investor that, when they invest in very large amounts of private shareholders’ money, they will have a sensible amount of certainty—balanced against, inevitably, the uncertainty that the world brings to commercial investments. Clearly, that is a delicately poised debate at the moment; many people are trying to balance it. The Government are obviously thinking about the way forward at the moment. That is probably as much as I can say on this.
Lord Teverson: I should have declared an interest. I chair a developing battery storage company, where, of course, the sector is the big problem; you talked about the queue on the grid. I have a couple of supplementaries. First, to get those systems working properly, do we need to be much cleverer in terms of the systems that we use to manage? I recently talked to someone in NESO with a long history in that area who said that a lot of these systems are still pretty clunky in terms of decision-making about which generator you go to or how you manage the grid.
Secondly, it seems that power purchase agreements (PPAs) are not used much in this country. Behind the meter, PPAs stop the need for any grid investment at all. Is there scope for those in this country? I have come across them more in Scandinavia, I must admit.
Nick Winser: On flex, clearly there has been controversy over battery utilisation by NESO. Some of those investments clearly need to be made, and I know that NESO is trying to make those investments to move completely from a world that was dispatch, with probably 40 power stations back when I was a control engineer, to one with thousands and thousands of different sources. I think that the industry accepts that some of that stuff is quite clunky, and we need to make rapid progress on that. Of course, it has provided a very difficult backdrop to battery investment, so I am sympathetic to that.
The other part of it, which deserves a huge amount of attention, is households and local balancing. We talk very casually about flex, but there are all sorts of different types of flex. To name just two, there is the flex that is somebody on a time-of-day tariff choosing to charge their batteries or their car or run their heat pump at night; and there is the flex that delivers a set of monetisable value—right through to, at the other end of the extreme, having digital assets that allow other players on the grid to dispatch heat pumps or batteries on and off for five or 10 minutes, in a way that the consumer will probably never even notice but which is incredibly valuable for the short-term operation of the grid.
We have to engage with everything, from the biggest areas—the big control centres—right through to how to make low-carbon devices interoperable and easily connected. As you can imagine, I am a bit of a home energy system geek, and I have battled through getting things connected up and optimised to a degree that I would be slightly embarrassed to share. But it has been quite hard, even for me, with some resources and being an engineer.
Lord Teverson: After several years I finally have a SMETS 2 meter, which I still have not got connected; I still have to do manual readings.
Nick Winser: It is hard work. Sorry for the length of these answers, but I would add that we need to not only think about households getting this stuff to work in the first place but recognise that some of it then stops working. The householder has to be resolute and willing to put in the investment of getting it to work again, so this is all very important for development.
I do not really understand your point about PPAs behind the meter. Because we have Contracts for Difference and we had renewable obligation certificates, PPAs were not as used, although they often sit alongside. There is now a big development of PPAs behind the meter in terms of data centres and so on, which may be what you are referring to. Helping energy-intensive industries to balance their carbon is a very welcome new development, and I hope that it continues.
Q73 Viscount Trenchard: Good morning, Mr Winser. I want to ask you about the Accelerated Strategic Transmission Investment Framework—ASTI—which was introduced by Ofgem to great acclaim in November 2022. Is it working? How many of the 26 projects have received early construction funding? What effect is it having on the operation of Ofgem’s price controls? Is it helping it to provide a strong early signal of the need for strategic network investments, and with sufficient incentives for successful delivery?
Nick Winser: My view is that ASTI has been a big success; in some senses, it stole my thunder a bit, because I thought about strategic planning. ASTI is, in many senses, an early experiment in anticipatory investment—that is, bringing funds forward and getting ahead of this rather than just being responsive to individual applications, which may be aggregated up to a need at the transmission level. So ASTI was a good move.
However, in essence, it picked out from all of those applications and network studies a few projects and said that we ought to accelerate those. That is a different thing to strategic planning. In some senses, my report took that and said, “Let’s cast this wider and do strategic spatial planning for the whole network”. As you can imagine, I therefore thoroughly approve of ASTI as a pilot for broader strategic planning. My knowledge of how the ASTI programmes are getting on is not detailed but I still have conversations with the TOs, who see them positively.
I know that, even with the extreme challenge of taking forward 88 projects for 2030, many of which are covered in ASTI, there is a fantastic degree of commitment to increasing staff sizes and engaging with both communities and the Planning Inspectorate. At a high level, I am certainly encouraged that we have reacted so strongly to this.
As an example, I left National Grid in 2015 or 2016. The department then would have taken some of this stuff forward and engaged with local planning and the planning process. Planning these things may have involved—I am guessing—40 or 50 people. I turned out to address National Grid’s 850 people the other day, which is encouraging because this is a major campaign of work; you will find that example across all of the TOs, NESO and Ofgem. They are really engaging on driving forward those ASTI projects and, more broadly, knitting them into the SSEP.
Viscount Trenchard: What effect is that having on the operation of Ofgem’s broader price controls? Is there a need for those price controls to move towards providing early certainty on the need for projects at the start of the price control process, with fewer projects being brought forward through uncertainty mechanisms? Do we need, for example, stronger delivery incentives with such an approach to ensure value for bill payers?
Nick Winser: Less use of uncertainty mechanisms on transmission and distribution are important, not least because part of the problem is that it takes a long time to mobilise into some of these programmes. Being half way through a price control and thinking, “We really ought to trigger this”, means that you have to distract from the day-to-day process and go back into discussions.
However, the forward views on transmission and distribution are different. As we try to avoid the use of uncertainty mechanisms, we have two very different processes here. The process that we are suggesting to avoid the use of uncertainty mechanisms on transmission is the development of ASTI, in essence, but then the SSEP, which will always be alive, will periodically look to the future and say, “We’re green-lighting all of these reinforcements. These reinforcements are still on amber, and these are on red”. So you can be expected to bring those forward, regardless of the point in the regulatory cycle.
On distribution, it is slightly different. It is about identifying the flight path in terms of increasing the overall capability of the network but still being responsive to the development of detailed plans locally. We want to create much greater long-term certainty in these two different areas but in slightly different ways.
Q74 Lord Gilbert of Panteg: Good morning. My question is about the service for major connection customers from the networks. First, are the incentives in place for networks to ensure sufficiently speedy connection for major network customers? Should further incentives for networks to meet higher standards and the timeliness of actual connections be considered?
Nick Winser: The commission looked very hard at that in the process of looking at what it felt were the future needs of the distribution system. It heard many stories and feedback of customers’ experiences with connections. At the local level—if I may extend your question—some of the things that we have already talked about, such as providing enough capability generally into the system and unlooping, are important things to help householders to connect multiple low-carbon devices and so on.
At the major connection level, though, the feedback to the commission was mixed. The DNOs have customer survey processes that are part of the overall regulatory process and, interestingly, the statistics are still quite strong. Yet, anecdotally, we also heard that there are very different experiences across the system and that going to two different DNOs is often like exploring two completely different processes at the working level. It is not only that the processes, the paperwork, the digital applications and so on are different in design; the culture of how these things are taken forward is also different sometimes.
We have reacted to that picture where the overall stats still seem to be strong but we hear quite a lot of concern that there is a mixed response on major connections. We have recommended that, as part of the next electricity distribution price control, known as ED3, Ofgem looks at more high-level incentives that will drive performance on major connections to become similar across the system and reliable; and that connections should be delivered in times that customers want. This is complicated, partly because—perhaps the distribution companies said this to you—when we look at the fact that it is taking longer to make those connections, there is often the argument that the customer is not ready so there is no point in racing to it. We have taken that into account but we do not think that, overall, the current regulatory system has a clear enough end-to-end target that distribution companies need to hit for major connections, so we have suggested some further regulatory development in that area.
Lord Gilbert of Panteg: You have talked about the customer surveys and the assessment of the levels of customer service. It sounds from what you are saying as though there needs to be a more granular understanding of customer experience for the major customers.
Nick Winser: I think so. It may be that the distribution companies have that data, but I am not sure that it is part of the regulatory debate. I do not want to malign them by saying that they do not know; they may do, but I do not have visibility of that. However, the commission is saying that we would like to see development in terms of how the distribution companies do that customer work; and that we would like to see this feeding into stronger high-level regulatory incentives to deliver major connections on time.
Lord Gilbert of Panteg: As well as incentivising networks to create greater capacity and to deliver on time, do you think they should be incentivised to utilise existing assets more effectively? We heard some evidence that there is insufficient focus, for example, on expanding the capacity of existing lines. Do you see a role for further incentivisation of greater and more efficient use of existing assets?
Nick Winser: I do not think we directly addressed that point. We have seen some capacity become free, which is very important. It is not a large amount of capacity compared to where we are going, but I am afraid that some degree of deindustrialisation has, in some places, created some capacity, and things like the miracle of the lightbulb, which we should celebrate. It is absolutely extraordinary that we now have lightbulbs that use 5% of the power that they did 20 years ago and give the same user experience. That has given some relief on the network.
I absolutely agree with you that making sure that existing network capacity is used needs to be part of the new regulatory settlement. That would involve an expansion of how we deal with total expenditure, in a sense, that meant that addressing existing assets, as well as building new ones, gave a regulatory incentive to provide some reward to companies that are very clever at that. That would also extend to flex, in my view, and how DNOs encourage flex.
I have to say that this is very complicated stuff from the point of view of regulatory knitting, as it were. The commission also said that regulation needs to be more high level and transparent. Inevitably, managing that sort of tension is always the regulatory reality when you come down to it. It is all very well for people like me to say, “Make it simple and high level”, but when you get into the detail of it, you find that smaller incentives sometimes seem necessary as well. As in most of this debate, we have to balance these things quite carefully, but incentivising the better use of existing assets and flex is definitely crucial.
Q75 Baroness Valentine: You have touched on elements of the questions I am about to ask you, so if you do not mind, I will just ask you four connected questions and leave you to answer what you want of them.
Is there sufficient focus on connecting sources of demand, such as businesses, to energy networks, as well as connecting new sources of energy supply? How can the needs of potential consumers of energy be balanced with the need to ensure adequate supply? Would you support the provision of clearer information on network capacity for potential connection customers? Should connection customers also receive clearer guidance on connection processes from networks and greater standardisation of processes and guidance between networks? If you need me to repeat any of that, I will understand.
Nick Winser: I think I got that. We do talk about businesses, and reference in particular the fact that we know, at least anecdotally, that there are pinch points in the system. West London has been talked about a lot in relation to data centres. We know that the distribution companies are having to work very hard in some areas. Although the overall picture is that we are in time to start to invest ahead of demand and not get caught out, there are pinch points in the system. So real attention needs to be given to that and to the point about making sure that we get a new set of well-thought-through incentives to make sure that business customers are getting an experience that is easy to understand and reliable; that is really important.
You asked about how all this fits with adequate supply, which I think is about the recommendation in the report—I will certainly reference it—that we should have a look at the security standards around which the network is built. I believe that the energy system of the future that we have outlined will deliver our carbon budgets. The commission—and, last week, the Climate Change Committee—proposed a very similar overall picture of the energy system of the future, as the NIC did in 2023. I believe that that leads to lower bills and to us hitting the carbon budgets.
However, we must make sure that security of supply stays in place. Our communities expect great security of supply. We have some of the best stats in the world; there should be no move from that. It is the case, though, that the energy system of the future can be very different. On the ability for houses to have devices that can be taken offline for short periods of time, when there may be system events and a fault on the system—potentially for households where there is some vulnerability, in particular—we think about having batteries to support them if the grid goes down.
All those things give us an opportunity to rethink how the system should be, rather than having this simple top-down view that you have to provide large amounts of facilities that are there the whole time. You can do very clever things somewhere in the future; they would look much more like the cleverness that we have in our phones and computers than the historic view of big power stations and big lines everywhere. So the commission is saying that we should think very carefully about the standards that we have in the industry for maintaining security of supply.
Your third question was on whether more information would be useful. The Commission’s view, and my view in my report, is that we should get out as much information as we possibly can. There is a requirement that we try to share that information in a way that is genuinely accessible to communities. In my report, I spent a lot of time arguing that, rather than being firmer and requiring the planning system to work faster in terms of being more decisive from the top, we need to socialise information, give communities understanding and give communities benefits that can help that debate, as opposed to being more rigorous and saying, “This is where we’re going”. We have to involve communities, treat them with respect and provide information that makes it all more comprehensible.
On your fourth point, clearer guidance is important at all levels. Going back to my story of being an energy geek in the home, as well as professionally, it is quite hard to work out what you can and cannot do at home. If the industry can provide clearer and, hopefully, inspiring guidance, accessible to businesses and also to households, about the energy system of the future, that would be a very good thing. The system is quite opaque at the moment, and I suppose that it is understandable, because it is changing very quickly. We need to work very hard as an industry in making this accessible to both domestic and business customers. This is very hard stuff. I hope that I have covered it.
The Chairman: Can I just ask a follow-up? You are saying that not everything should be top down, but we have Government setting targets and the direction of travel, and we have the strategic policy statement from Government. Have you any views on that and whether it is adequate? Are there problems of clarity? I think that the direction of travel is clear, but do you have a view on that? Also, do you have a view as to whether more needs to be said about another type of balance between investment and what customers actually pay? You mentioned that, long-term, there could be advantages to the customer, but clearly, in that interim period, there could be difficulties.
Nick Winser: I thought that the distribution report was very good in all respects, and it said some profound things on this. There was a clear recommendation that the SPS should be used in a slightly different way, and focused. That was all about saying that on transmission we are playing catch-up and on distribution we do not want to be in that place, so we should invest more strongly, because we think that the risks of overinvesting are outweighed by the risks of underinvesting. If we needed a lesson on that, we could look to the transmission sector and see how hard we are having to work now to catch up.
We felt that regulators had been under very significant requirements, rightly, to minimise bills in the short term—but we went a lot further than saying that we need to invest and that it would impact bills. We put forward that, for the average customer, investing strongly in the distribution system by the mid-2030s might imply an additional £20 per year per average customer. One of the great benefits of doing that work at the NIC was that we were able to reference our previous report, which said that by the 2030s, by going on this renewable path, with much greater deployment of heat pumps and electric cars, the saving per household might be of the order of £200, although obviously it is very difficult to predict these things.
To your point, the mismatch in needing to invest to get the benefits in time is not nearly as significant as people think. Because all of this investment will be funded by private investors coming into these regulated companies—they will invest the money and then be rewarded with a cost to capital and depreciation against the asset life—those investments are smoothed over the next 40 or so years. So actually, you do not really run into the problem whereby you have to say to the public that they should invest now for benefits later. The alignment is really quite close, because we get the benefit of smoothing the cost of the investment.
Coming back to where you started, the opportunity for the SPS is for it to be used for Government, as the Climate Change Committee suggested last week and as the NIC suggested. We think that the future network and the future energy system look like this. It means a doubling of demand by 2050 and it means a 50% increase of demand by 2035—therefore, let us get investing with the benefit of that private money coming in and smoothing the capital bump. One would hope that, as we get much more significant penetration of renewables, we would come off the marginal price of gas-fired power and on to a lower marginal price, with a combination of a renewables zero marginal price and the use of batteries and other flex. That would be a lower cost, and it would mean that the costs and benefits broadly aligned.
The envelope of costs that we gave was not straightaway £20—it was £5 to £25, which is rather a large band—but it reflected that, in the early years, as you do some of this extra investment, the impact on bills is really very low. You get a pretty reasonable alignment, so you can go to customers and say that this is not only good overall but actually, by and large, the costs and benefits are incurred in approximately the same timescales.
The Chairman: And energy security.
Nick Winser: And maintaining energy security as well, yes.
The Chairman: Thank you very much for your time. You have been very patient with all our questions and, indeed, our supplementaries. The various hats that you wear clearly come together. I think some of us sometimes wonder whether every other aspect of this comes together—but thank you very much for the information that you have given and all that you have told us.
Nick Winser: It has been a pleasure. Thank you very much for your attention and your excellent questions.
The Chairman: Thank you—I will now close this part of the meeting.
