HoC 85mm(Green).tif


Welsh Affairs Committee

Oral evidence: Grid capacity in Wales, HC 1092

Wednesday 16 March 2022

Ordered by the House of Commons to be published on 16 March 2022.

Watch the meeting 

Members present: Ben Lake (Chair); Simon Baynes; Ruth Jones; Dr Jamie Wallis.

Questions 24 - 42


II: Rhys Wyn Jones, Director of RenewableUK Cymru, Renewable UK; and Chris Williams, Head of Industrial Decarbonisation, Industry Wales.


Examination of witnesses


Witnesses: Rhys Wyn Jones and Chris Williams.

Q24            Chair: Welcome, everybody, to the second panel of this morning’s meeting of the Welsh Affairs Select Committee. I am very pleased to welcome Mr Chris Williams and Mr Rhys Wyn Jones to give evidence to us this morning. I will ask you to very briefly introduce yourselves for the record.

Chris Williams: I have had 30 years’ service in the steel industry and I am currently seconded to Industry Wales, which is an arm’s length Welsh Government body, to head up the development of the South Wales Industrial Cluster, which is a grouping of manufacturing industries and power providers, academics and local councils coming together to map our route to net zero.

Rhys Wyn Jones: Diolch Cadeirydd; thank you, Chair. I am director for RenewableUK Cymru, which is part of Renewable UK. We are an independent trade body representing the interests of renewable energy developers, mostly large scale, on offshore wind, fixed and floating, and also interested in solar, hydrogen and future energy systems. Diolch, thank you.

Q25            Chair: Thank you, both. We have heard quite a bit in the first panel of today’s meeting about concerns with grid capacity. To begin with, I am interested to learn of your opinions on what the current capacity issues are with National Grid and perhaps how they impact on your own organisations. I will start with Mr Jones.

Rhys Wyn Jones: Thank you very much. I think it is very well documented that Wales faces significant grid constraints. Essentially, what we are looking at over the next less than 30 years now is a doubling in the requirement for power, so we know what is coming. To characterise the different pictures in different parts of Wales, in mid-Wales we have a long-standing chicken and egg situation with grids, where we are unable to progress what would seem to be the most logical solution where a transmission link into mid-Wales would allow multiple generation assets to connect. As you will no doubt hear, National Grid relies on projects being present and in need of a connection, but there are very few active development projects currently, specifically because of the known connectivity issues. Absent anticipatory investment in the required reinforcements, it is difficult to see how progress can be made in quite short order.

In south Wales it is slightly different. A lot of the situation with grid will be determined to a large extent by what happens with floating offshore wind in the Celtic Sea. There is probably more certainty there because the leasing opportunity for the seabed, which is run by the Crown Estate, gives a little bit more line of sight in the scope and scale of the projects that might ensue and, therefore, the reinforcement that might be required. The key point is that the grid in south Wales is constrained chronically right now and our members are constantly telling us of examples where they are having difficulties in obtaining connection—even at quite a low voltage—and being asked possibly instead to connect to the transmission network.

Finally, with north Wales there is huge significant potential. There are live projects, such as RWE’s Awel y Môr, and obviously the potential through the fourth round of seabed leasing that could also deliver a gigawatt scale project, which would require significant network underpinning as well.

It is a picture of constraint across all of Wales and we don’t have a huge amount of time to address it. Thank you.

Q26            Chair: Thank you, Mr Jones. Mr Williams, do you have anything to add?

Chris Williams: Yes. I think I am here mainly to add another dimension to discussions that have been held up to date and that is the increased demand that industry will place on the grid as we go forward. Our manufacturing industries, which are typically multinationally owned at the moment—not all but a lot of them—are all trying to work and plan how we can get to net zero. Each individual industry, which let’s say uses natural gas at the moment to heat up its products, will be looking at how it transitions away from natural gas. That could be electrification or hydrogen, which should ultimately end up being green hydrogen from electricity.

Whichever way industry goes, it will need huge amounts of additional electricity. In the National Grid’s “Zero2050 South Wales Optimisation Report”, you see that industry is likely to need three to four times the amount of electricity it does now. In fact, it obliterates how much extra electricity will be needed by EVs, so EVs is a small part of the problem compared to what industry will face. The risk, of course, is that if the grid cannot supply industry with the power it needs when it needs it, industry will be forced to leave. There will be a real jobs risk here from our manufacturing and industrial sector.

It is vital for Wales’s net zero journey that these grid issues are resolved—the discussions and anticipatory investment. Industry has started to come together. We have started to be able to help and support Wales on its journey by coming together, discussing and exploring options. I think we are right at the start of that. In the Welsh Government’s net zero policy, plans and mechanisms for moving forward over the years, the term “Team Wales” is used. I think that team is currently taking shape. Those of us who have been on management courses and team building know all about storming, norming and performing in helping a team come together. I think we are probably in the storming phase at the moment. We are all positioning and putting cases forward on what our problems are and what the opportunities are. Hopefully that will move forward into performing as the plans develop.

To recap, industry will need a huge amount of additional power. If that is constrained by the grid, Wales is at risk of losing portions of its industry, which will be a real shame.

Chair: Thank you. I agree.

Q27            Ruth Jones: You and the panel before you clearly identified the constraints that we have at the moment. Looking at the availability of a suitable port for renewable projects, we have had some very helpful background briefing. South Wales may be okay; Cardigan is obviously a big issue. How much of that do you see as a constraint to your actually developing renewable projects, getting them into the ports? Shall I start with Mr Jones first?

Rhys Wyn Jones: Thank you very much. As far as ports are concerned, the feedback that we have from members, first and foremost, is it is about maximising the opportunity for renewable energy in the supply chain. If you take something like floating offshore wind as an example, it is potentially a huge game changer for ports. I think that if you look at individual port strategies—so that means south Wales—then the likes of ABP and Milford Haven are looking to progress and develop their offering of potentially manufacturing, fabrication, marshalling and assembly of componentry to serve and construct the wind farms.

That is probably a main area of focus for ports rather than grid, necessarily, although grid and the future requirement to connect huge amounts of generation assets in a coherent and co-ordinated way has been dealt with currently through the offshore transmission network review.

My final point is that none of this is to say that there is not a huge number of things that ports might also want to do and focus on. For example, the operations and maintenance aspect to service offshore wind farms is crucial, as could be decarbonising the maritime fleet, either through providing charging or fuelling for maritime vessel and, indeed, any transformations at the port that might be demanded due to the transition to clean energy. Those are my comments. Yes, grid is important but I think there are other things in the supply chain that ports have their eyes on as very significant.

Q28            Ruth Jones: Thank you. Mr Williams, with your industry hat on and particularly looking at the port infrastructure, do you have any thoughts there?

Chris Williams: Yes, I think ports will be even more important for us than they are now, particularly when we look at some of the technologies we will have to employ to decarbonise and get to net zero. They will include technologies like carbon capture utilisation, where you turn CO2 into chemical feedstocks, or carbon capture storage, where you look to capture CO2 and put it on a ship to transfer it way up the north of the UK to a carbon capture store.

All of those technologies will need additional power, so as industry we are looking to our ports to support us through that journey. The ports will need additional power to support us and if the ports do not have access to the grid capability to be able to supply those services, again, that puts industry at risk in its net zero journey.

Also, as Rhys mentioned, there are fantastic opportunities that the renewables sector offers in developing the supply chain locally in Wales, and what that offers for the ports in particular in manufacture and maintenance. Again, manufacture and maintenance will need power, so it will need grid capability. Therefore, all of it comes back down to support for grid capability.

Ruth Jones: Thank you very much.

Q29            Simon Baynes: Thank you both for giving up your time to come before us this morning. I want to look at the assessment of the UK Government’s policy currently in place concerning net zero targets and grid capacity. In particular, do you concur with the UK Government’s assessment that a smart and flexible grid is an essential part of achieving net zero carbon targets? We will go to Mr Jones first, please.

Rhys Wyn Jones: Thank you. Obviously, it is not possible to strategically plan the grid network without understanding the location of future generation. These things need to be considered holistically, so, in that regard, we certainly agree with the Government’s overall assessment.

There are three possibly key things that Renewable UK believes the UK Government should consider. One of the most important things is certainly the reforming of Ofgem’s remits to have a clear net zero delivery focus. I think that might enable reframing approaches to policy areas such as anticipatory investment in the grid, the charging regime for generators who are accessing the grid and, also, prioritisation and development of a flexible energy system. That is the first thing.

The second thing, which is vital and is coming forward now, is the offshore transmission network review. That will dictate strategy for connecting multiple generation assets in the future, as I alluded to earlier. With specific relevance to Wales, anything emerging from that OTNR process should not delay the development of floating wind projects in the Celtic Sea, because that could jeopardise the huge opportunity that that emerging technology presents.

This is a relevant part of the UK floating wind but it is probably further behind the curve than other parts of the UK, so we don’t need to possibly further constrain development in the Celtic Sea by having grid becoming too much of an onerous issue. There is plenty of other jeopardy there already. Grid underpins everything as far as we are concerned.

Chris Williams: Again referring to the industrial and the route to net zero, we will look at the Ten Point Plan. Point 8 is the formation of the industrial clusters, so in south Wales we will aim to be one of the four clusters in point 8 of the Ten Point Plan. That is based around technologies that we know our industries will need to get to net zero, as I have mentioned before, with carbon capture utilisation and hydrogen, huge hydrogen supply capabilities and carbon capture and storage.

At the moment, the way the sequencing process is run is very much where their CO2 stores are. It has picked the first two clusters as being the north-east and the north-west of the UK. That ties in north Wales, which is potentially good for north Wales and hopefully that can link in not too far away, which is good, with the HyNet project. Then in the south of the UK puts us in a position where we are waiting and struggling to understand what our route is to net zero. Hopefully something will come out this year and we will be able to put a bid in to be a cluster within the sequencing process. That will be fantastic for south Wales industry in that it will have a story to share and explain to its multinational owners and they can continue to invest in south Wales because we have a route developing to net zero.

Again, it will be such a shame if that route is dismantled or derailed because we do not have grid capacity to cope with the extra equipment we need to get to net zero.

Simon Baynes: Thank you both very much.

Q30            Ruth Jones: You have both given your thoughts on the UK policy. I am going to hone it down now to the Welsh Government policy. Thinking about the Welsh Government’s current policy concerning net zero targets and grid capacity, what are your thoughts on the ability to meet these targets in line with the UK overarching policy?

Chris Williams: Thank you. I mentioned at the beginning Team Wales and that approach to net zero, which seems great. As industry, we have come together in south Wales to form the South Wales Industrial Cluster. That is primarily individually but then as a grouping through SWIC, as it is called, to engage with Team Wales to develop our route to net zero. That is a tick, it is good. That enables the collaboration that hopefully will be needed as we move further forward.

The Welsh Government have started local area energy plans with Conwy, Newport and now Pembrokeshire and industry is engaged with those plans. It is the same with the regional plans where industry is now able to be engaged with those. I think there is a lot of work to do from an industrial perspective and some empathy for the Welsh Government in trying to plan and map a route forward for industry, which is where collaboration in Team Wales comes from. Grid, of course, will be an important element of the local area energy plans and regional plans and then the development of the national plan and how grid is involved in that with Welsh Government’s Strategic Grid Group, which sounds good.

When I said earlier we are storming, norming and forming the steps to get to Team Wales, we are in the storming phrase. Hopefully, through those mechanisms and collaboration—through investigations, modelling and developments—we can start to develop the grid we will need. It comes back to the discussions from the earlier panellists about anticipatory investment. I hope that mapping and modelling will ease the risk for anticipatory investment and the grid can be made ready for our net zero journey in industry.

Rhys Wyn Jones: I echo a lot of Mr Williams’s comments. We still find ourselves very much in an evidence gathering phase. There is a huge amount of work going on in the future energy system and grid requirements in Wales. For example, the Energy Systems Catapult is undertaking a grid-scoping exercise for gas and power currently. We also have a commitment to build a national energy plan by the end of 2024, I think it is. There is a danger here that if we overly get caught up in trying to figure out exactly what grid we need to support what demand we end up losing out, because we do not have a huge amount of time. These issues have been around for a long, long time.

I will focus in with some remarks specifically on incentivising grid investment and will highlight three things. Our members feel that, certainly for something like onshore wind, a more rapid and co-ordinated tendering exercise for the woodland estate would signal that initial works for grid reinforcement could proceed with less risk. A second thing that could be considered, which in theory is very simple, is to set an ambitious target for specific technologies. If you say you want X amount of this particular generation by a particular date, that sends appropriate signals to the likes of the network operators that this capacity will come forward. The final point is on planning reform, which is slightly technical. Currently where you have to make separate applications for your low-carbon generation project and the associated infrastructure or grid that goes along with that, it ends up being a very expensive and onerous proposition. As a recommendation, our members feel that the Welsh infrastructure consenting regime, which we hear will be delivered in this Senedd term, needs to be prioritised as a matter of urgency to make sure we streamline and facilitate these projects coming forward.

Those are the things that I think would incentivise grid. There are others but those are the three main things.

Q31            Ruth Jones: Thank you. I have a final supplementary question about your thoughts on the Welsh Government’s pledge to work with Ofgem to consider creating the role of the Wales energy system architect. What do you think?

Chris Williams: I do not profess to be that knowledgeable in this area but in principle it sounds like the right thing to do. Mechanisms are pulling different groups together but it is also then having somebody to take the lead and take charge and start to make some of the difficult decisions that will need to be made. As Rhys said, we do not have time; we need these things to happen quickly. I think in principle, yes, it is good and it will help with the question that a number of us have about who is in charge. Is it the Welsh Government, is it the UK Government or is it the grid that is in charge of how we get to net zero? I think it will help to tackle some of that question.

Rhys Wyn Jones: Similarly, in principle, yes, I would support it. There is that requirement for an interlocutor role communicating Welsh requirements. As I alluded to in my earlier remarks, there is a huge amount of work going on at the moment to collate evidence to provide the needs case.

The main thing that would demerit advocating for this role is that it would need to have the clout to be able to take action. Absent the full levers of influence—for example, around leasing opportunities or contracts for difference or specifically around anticipatory investment—you do not want to create a role or a pool of roles that do not have the authority or clout to be able to expedite the recommendations they make. That is my overarching point on that.

Ruth Jones: Thank you very much.

Q32            Chair: We have heard quite a lot of evidence this morning about how limiting the current approach to grid investment is. I am interested to learn more about what effect the current strategy of waiting for a pipeline of projects to come to the table before then including the grid has on your ability to plan as businesses. Mr Williams, how does it impact? Are you able to plan long term under the current way in which grid investment works?

Chris Williams: No. To answer that question properly, yes and no. In some of the options that our industries have for working out how they decarbonise they are able to plan options for their chosen way forward, if that makes sense. For some of our bigger companies, no, it will be completely down to what the grid can do.

We are trying to work around the challenge in understanding what we can do with some decentralisation. For example, what does industries in local areas clubbing together bring for of a small decentralised system that is backed up by the grid and how does that help that grid? There are ways, which we call clean growth hubs, where we look to bring inward investment as well based on a circular economy and improving the industries that are in place at the moment. Therefore, yes and no.

Q33            Chair: If I have understood you correctly, I imagine that the ability to make long-term investment is very difficult?

Chris Williams: Yes, particularly for the bigger projects. As I said earlier, when we are looking to be one of the sequence clusters as part of the Ten Point Plan it will necessitate some big connections. As we heard from the earlier panellists, that has been an issue now. If we are looking to be a sequence cluster as part of the Ten Point Plan we need to make sure that we are working with grid and can have what we need, as that will be hugely disappointing for industry.

Q34            Chair: Is it fair to say, very briefly, that anticipatory investment and a change to the way in which the current system works are crucial if we are to reach net zero?

Chris Williams: Yes. As was said earlier, we all know we have to get to 2050. Everybody knows where the opportunities are. As industries now, we are working out what our options are. We can put them forward to build a grid to suit that, in principle.

We were involved in the Zero 2050 Budget in south Wales with National Grid where we did some of that. That is why it was disappointing to see that nothing followed as a result of that project. We thought that the project was being run as a trial for an area, for it to plan its anticipatory investment needs—because it almost worked out what 2050 looked like—to enable then grid to invest around that. However, I suppose they cannot at the moment and they have to fall back on to the rules they have to follow.

Q35            Chair: Mr Jones, similar questions to you. How easy is it to make long-term investment plans under the current regime?

Rhys Wyn Jones: I do have some sympathy for network operators in Wales. We tried to do large-scale strategic infrastructure before and they did not go ahead. Therefore, reputationally and financially network operators still feel, understandably, extremely cautious about future investments because of what has happened before. None of this is to say that individual developers cannot pursue their own connection agreements relating to specific projects independently, and that does happen. However, obviously what you want to avoid is falling into this linear piecemeal approach because otherwise we will end up with a spaghetti soup, which is in nobody’s interests.

It ultimately falls back to exactly what will tip the balance of the scales in favour of anticipatory investment. As I alluded to earlier, with offshore it is slightly clearer because the leasing round dictates the scope and scale of the opportunity that potentially will come forward. With onshore, specifically somewhere like mid-Wales, I think we need a lot more clarity on the thresholds that need to be met to trigger investment, or at least clarity on the preliminary costs and the allowances that will trigger that initial front-end engineering and design work to go ahead on a basis that is shared risk-wise between the appropriate stakeholders.

Part of this goes back, ultimately, to Ofgem’s remit. Having the net zero commitment enshrined is so important. However, I also think Welsh Government can signal their commitment, for example, through improving the rate of development opportunities that come forward on the woodland estate. I think that would send a very clear signal and lock investment.

Q36            Chair: Thank you. A quick question, Mr Jones; is surge pricing a useful mechanism for alleviating pressure on the grid in the short term?

Rhys Wyn Jones: It is not something we have a fully formed view on. I think it will definitely be a key feature of the future energy system. The obvious caveat here with surge pricing is that it would need to be implemented in a way that ensures the most vulnerable consumers are protected. That is probably as far as I can go on that at the moment but I am happy to submit more considered views when we submit our written evidence to the Committee, if that is okay.

Q37            Chair: Thank you very much. The final question from me for now. I think I may know the answer but it will be beneficial to have it on record. From all you have said this morning and looking at the situation as it stands, what is your assessment of the UK’s Government progress in achieving decarbonisation of the electricity system by 2035? To be blunt, is it feasible under the current regime?

Rhys Wyn Jones: It is certainly feasible and it is achievable. The appetite among our members to invest in low-carbon generation and flexible generation, and to do it in Wales in a way that delivers social and economic value, I do not think has ever been greater. The will is there. On how we do it, I have talked about Ofgem’s remit. We should consider ambitious targets for specific technologies. We also need to get the output from the offshore transmission network review because that is our most pressing issue. We need to get that right. There is a huge amount of generation that needs connecting and we need to do it in a strategic way.

On its relevance to Wales, it needs to not preclude projects that are ready to move to apply for CfDs from being able to do that because that will hold us up even further.

Q38            Chair: Is it fair to say that unless we look at Ofgem’s remit and look at harnessing the potential of offshore, the ambition to decarbonise the electricity system by 2035 could be in doubt? It is possible, it is achievable, but there are things that need to be done?

Rhys Wyn Jones: Yes, there is a degree of jeopardy. To be fair, I think that is well understood by most stakeholders. There is a lot of work to do.

Q39            Chair: Mr Williams, a similar question to you, please.

Chris Williams: I will come back to when we talked about the cluster sequencing programme because that will include hydrogen, carbon capture and storage and CO2 shipping from south Wales, which will be an important part of that 2035 target for our region. From the way we are developing at the moment we should be able to pull together a programme to meet that target. Of course that is in line with the renewables then coming on stream in parallel.

As was mentioned earlier about grid capability for green hydrogen made in Pembroke, that obviously is a concerning issue in that whole picture and vision for us achieving 2035.

Q40            Simon Baynes: Mr Williams, I think you touched on decentralisation earlier. Is a decentralised grid a viable option for such areas as mid-Wales where there is limited transmission infrastructure? If you could answer that first, please.

Chris Williams: I would rather not answer that question about mid-Wales. When I was referring to it I was talking about quite small geographical areas, so it might be around interconnecting a few industrial sites together with some inward investment maybe. If I can defer the mid-Wales question.

Simon Baynes: We will leave mid-Wales out of it. Let’s just talk about it in general.

Chris Williams: There may be opportunities, particularly what we are exploring with what we call a clean growth hub. We have different industries coming together with maybe a local hydrogen supplier or local carbon capture and storage. We are at the earlier stages of trying to understand each individual industry’s net zero journey and how that fits into the area around it, what inward investment opportunities that offers in a very local area and then what the local grids are capable of or maybe a decentralised small micro-grid might be suitable or might be needed. We are at the early stages of trying to work that out.

In answer to your question, there might be some opportunities but I think all of them would still need to connect to the grid.

Rhys Wyn Jones: Yes, certainly there is potential for a greater role for decentralisation and for micro-grids to play an important role in helping to balance local supply and generation. The key point I will draw out is that unless you are a wholly self-contained or islanded system, independent of local distribution, if you are in a situation where you have multiple micro-generation assets attempting to connect there is a greater chance the connected or embedded generation will have an impact on the local network. That means you need to make an agreement with the local distribution network operator before the connection is made, which costs and can be very expensive. That makes it very difficult for local developers or community groups to justify the expense and I know there is a lot of work being done in Wales to help meet those costs.

There is loads of potential and it will be vital to the future energy system. However, to do that you will still need to do the big stuff as well and I think we need to remember that. There is an urgent and pressing need to address our issues on the broader-scale stuff.

Simon Baynes: Thank you both very much.

Q41            Ruth Jones: I will go back to electric vehicles because, as you might have gathered, this is my bugbear at the moment.

My constituent, the Very Reverend Ian Black, the Dean of St Woolos Cathedral, is very upset because he cannot get from Newport to Bangor without going via England and the charging infrastructure where it takes 21 hours on an ordinary one and fast charging is not available very often. From your higher positions, what can be done to ensure that the grid can cope with the increased demand? As we are pushing people to take up electric vehicles, how will you ensure that the grid is available and there is sufficient demand and capacity for these new electric vehicles?

Chris Williams: I think again it will be due to anticipatory investment for the grid working with councils and communities, understanding the need and then planning and developing the capability to meet that need. It comes back to the point earlier about who is in charge, who can make that happen, who drives it.

Twisting the question a little bit, it is very similar to the challenge industry faces in understanding where it will get its grid connection or its extra power capability from, or whether it needs to fit an extra box to supply it with hydrogen that will be fed off the grid. What is the process? With the way Welsh Government are doing it with the local area energy plans, the regional plans, hopefully your challenge about EVs can be absorbed into that process and then the councils have a say over their local area and what their area offers.

Q42            Ruth Jones: Thank you, that is very helpful. Mr Jones, do you have anything to add?

Rhys Wyn Jones: We have talked a lot about the requirement and the fact that a lot of this hinges on major strategic infrastructure upgrades. If I bring it back to the specific demand picture, an average household would draw around about 1KW of power, between 2KW to 3KW of power when it is occupied or maybe 5KW of power during the winter. If you then add a domestic EV charger on to that, that is about 7KW drawing over whatever period. A heat pump could be drawing 3KW. Therefore, just on a dwelling by dwelling basis the amount of power you will need through electrification starts to stack up very quickly.

To bring it back to EVs, the new charging infrastructure needed will absolutely significantly increase demand on the system. For example, Scottish Power Energy Networks predicted that EV charging alone could add over 700MW to its distribution network, incorporating mid and north Wales as well as Wirral and Mid Cheshire, by 2050 without development of sophisticated vehicle-to-grid services.

I know the Welsh Government are also making huge efforts to reduce demand through a focus on active travel and their approach to road building. That is laudable because consumer behaviour modification is such an important aspect of net zero. However, obviously a lot of our journeys do not take place over a short distance, they take place over a longer distance. The way one industry stakeholder articulated this to me was that if you were to build a fast-charging station for EVs and HGVs, let’s say by the side of the M4 or by an A road in Wales, that would take the equivalent power of two Lampeters. It is a huge amount of power just for EVs.

To go right back to the fundamental point, we need to make the investment in our infrastructure for power distribution to be able to decarbonise society and transport is obviously a key part of that.

Ruth Jones: Thank you very much, both of you. You have very clearly highlighted the issues.

Chair: Thank you very much. Mr Jones, as a Lampeter boy I say there is always room in the world for more Lampeters but I am not sure about the electricity consumption. Thank you both for your very useful evidence this morning. It will greatly aid our grid capacity inquiry, so thank you very much for your time.