Public Accounts Committee
Thursday 22nd October 2026
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Clive Betts
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Clive Betts
Everyone to this morning session of the Public Accounts Committee. Just to say, to begin with, apologies from Sir Geoffrey Clifton-brown, the chair who is currently away on parliamentary business. And as deputy chair of the committee, I'm Clive Betts. I'm chairing the committee this morning. We're going to look at upgrading the grid, which might sound a very general and uninteresting subject, but it actually is quite important to everyone at home listening to this, as well as everyone in this room. Today, the electricity transmission network, otherwise known as the grid, is a system of cables and substations, overhead lines, pylons, moves, electricity around the country, really important to get to people's homes and businesses and makes them work.
The government is currently pursuing a major upgrade of the grid to make sure that we can deliver 95% clean electricity by 2030, and that's going to mean £70 billion. That's right, £70 billion of investment between 2025 and 2031 to make sure that investment takes place. So we're going to look at the challenges today facing the government designates on the panel. I introduce the panel in a minute whether there is a credible plan to do that with on time and within budget, and all the benefits going to be delivered to consumers of electricity as well as as we've got Ofgem and the national energy system operator Esso here today as well.
I'm going to ask the witnesses to introduce themselves now. And when we come to each of the organizations, I can say just in two sentences, can you say what you do? Because most people might have heard of the department, they might have heard of Ofgem as the organisation which puts their bills up every so often. And they might they might not have heard of Esso at all. So just to just to try and put that into context, because lots of these acronyms go around and often people have no idea what they amount to. So begin with permanent secretary.
The government is currently pursuing a major upgrade of the grid to make sure that we can deliver 95% clean electricity by 2030, and that's going to mean £70 billion. That's right, £70 billion of investment between 2025 and 2031 to make sure that investment takes place. So we're going to look at the challenges today facing the government designates on the panel. I introduce the panel in a minute whether there is a credible plan to do that with on time and within budget, and all the benefits going to be delivered to consumers of electricity as well as as we've got Ofgem and the national energy system operator Esso here today as well.
I'm going to ask the witnesses to introduce themselves now. And when we come to each of the organizations, I can say just in two sentences, can you say what you do? Because most people might have heard of the department, they might have heard of Ofgem as the organisation which puts their bills up every so often. And they might they might not have heard of Esso at all. So just to just to try and put that into context, because lots of these acronyms go around and often people have no idea what they amount to. So begin with permanent secretary.
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Speaker 4
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Speaker 4
So I'm chief executive of National Energy System. Operator. We're a relatively new public corporation. We were sort of established in public ownership in 2024. We're responsible for strategic planning of the energy system over the long term. We also operate the electricity system through the control room in real time, and we provide advice to government and Ofgem around the sort of development of the energy system over the long term.
10:04
Clive Betts
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Clive Betts
Right. I think we'll unpack some of those responsibilities as we go through to find out exactly who does what and who and how you relate to each other, which I think is one of the big challenges here. But if we could begin with the permanent secretary, there's a big challenge, isn't there? 88 upgrade projects are deemed to be necessary by 2030 to keep the grid working in a way which enables all the new renewable projects to be connected to it.
Right. So what needs to be done to make sure that happens?
Right. So what needs to be done to make sure that happens?
10:04
Speaker 1
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Speaker 1
So I think it's worth sort of stepping back and looking at, first of all, why we are doing this. So as secretary of state itself has said, we do see the Clean Power goal as one that makes sure that we are going to get a cost effective system, particularly in the context of the geopolitical changes that we are seeing. And if I were to lay the programme out as a whole, I think challenge number one has been to make sure we unlock the investment for the companies to be able to build the grid. Now, if you look at the reforms we've made over the last 5 or 6 years, I think through Ofgem's work on regulation, I think we have achieved that.
So the investment is flowing. The companies have the money they need to deliver what they need to do going forward. For me, this is all about our collective efforts to oversee this delivery programme. So as the report says, within Disney's, we will be continuing to build on the work we've done so far to make sure we have oversight of the portfolio as a whole, which includes generation and other projects. Ofgem need to make sure they give networks the right incentives to deliver, and also need to make sure that they play their role in coordinating and making sure that people can connect to the grid and make all the technical changes that need to be made.
So there's a joint effort here. If I had to summarise it in in sort of one broad term, it's the delivery arrangements we are putting in place.
So the investment is flowing. The companies have the money they need to deliver what they need to do going forward. For me, this is all about our collective efforts to oversee this delivery programme. So as the report says, within Disney's, we will be continuing to build on the work we've done so far to make sure we have oversight of the portfolio as a whole, which includes generation and other projects. Ofgem need to make sure they give networks the right incentives to deliver, and also need to make sure that they play their role in coordinating and making sure that people can connect to the grid and make all the technical changes that need to be made.
So there's a joint effort here. If I had to summarise it in in sort of one broad term, it's the delivery arrangements we are putting in place.
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Speaker 1
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Speaker 1
Well, I think we've got to recognise that there are always going to be risks around a programme this big, and some of those are within our control or the network companies control, and some of those are outside of it. I should make one thing really clear in this system. Ultimately, the transmission companies are responsible for making sure these are delivered on time. If they're not delivered, then we have a coordination job and we have to make sure that as best we can, the generation and the network align and that we minimise any further consequences. Now that's complex.
So for example, if you look at some of the benefits that new generation will bring, we need to offset that against constraint costs that may appear, for example, if the generation is earlier than some of the network. But that's the work we need to do together.
So for example, if you look at some of the benefits that new generation will bring, we need to offset that against constraint costs that may appear, for example, if the generation is earlier than some of the network. But that's the work we need to do together.
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Clive Betts
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Clive Betts
So one of the problems with all these complicated arrangements, where the three organisations today before us who are responsible for making sure the lights are kept on and the clean electricity keeps moving forward to be delivered. And then there's the the various companies who actually generate the power as well, who are not at the table today, but are clearly pretty important. You've just said so there's at least four organisations or groups of organisations who are there responsible, which means in the end, no one is actually accountable, are they?
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Speaker 1
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Speaker 1
Well, ultimately the department is accountable. So we set the policy and strategy, but we have different roles here. And I might ask Tim and Fintan just to expand on what they do Ofgem's role in my mind, you know, obviously I have some deep experience of Ofgem is to set the incentives and really to set the framework for the networks to deliver. And as I say, Fenton's and his team are the ones that operate the system and make the technical changes we need to make along the way. So ultimately, as my Secretary of State said last week to the committee, it is the departmental department's responsibility to set the strategy and to oversee delivery.
But we need to do that.
But we need to do that.
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Speaker 1
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Speaker 1
So the UK has one of the most resilient systems in the world. As this committee knows, we can never guarantee the lights won't go out. As you know, there are always risks in any system. That is not a statement of of, of any degree of risk here. It's just a fact that as we saw in 2019, for example, there are circumstances where that might happen, but ultimately accountability rests with us. Yes, yes.
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Speaker 1
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Speaker 1
We don't shy away from the fact. And my Secretary of State said this last week that the department is accountable. We are driving a major programme of change. And ultimately that comes back to us. Now, that doesn't mean that does everything. Ofgem and Nico have critical roles, and perhaps it's worth them just expanding on what they do to to support that briefly.
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Speaker 3
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Speaker 3
Yeah, I mean, I will just build a little bit on what Jonathan says. But I mean, I roll off gem is to make sure that we create the right environment to release the investment to invest in the network. And we, we need to upgrade the network. That is, that is a given. Obviously, we need to do it as quickly as we can, and delays have consequences. But our job is to make sure that we make that investment available. And then we hold to account those responsible for building out the network. And that means in terms of time and delivery and of costs.
So that's broadly our role in this whole process is to really focus on the network upgrades and make sure it's happening to time and to.
So that's broadly our role in this whole process is to really focus on the network upgrades and make sure it's happening to time and to.
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Speaker 3
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Speaker 3
Well, we have quite significant powers over them in the sense that we we approve projects, we approve funding, we have incentives in the mechanisms in the price control mechanisms so that they they face costs if they fail to deliver or if they don't hit targets. And similarly, we can create incentives to try and get them to, to, to meet targets and get ahead of them.
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Speaker 4
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Speaker 4
So maybe split it into two. One is development of those network plans looking out to the future. So what is the set of network reinforcements or upgrades that are needed in order to ensure we continue into the future to meet security of supply standards and connect up all of the various generations so we develop those plans, ensure that they are optimised. They are then delivered. As Tim and Jonathan said, by the transmission companies. We also have a role in real time of balancing the system on a day to day, minute by minute basis in the control room, dispatching the generation and controlling the outages on the transmission system, flows over interconnectors, etc.
to make sure that the system is in balance at all times.
to make sure that the system is in balance at all times.
10:11
Clive Betts
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Clive Betts
Right. So one of the challenges, I think, is that nobody's quite sure any one point in time where we're up to. And one of the suggestions is you should produce quarterly reports on the progress with all the key projects, where they're up to, what the problems are and what needs to be done to rectify them quarterly reports. And that's something that I think we often ask for in Parliament to make sure there is transparency about what's going on.
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Speaker 3
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Speaker 3
Yes. I think that what I think the Nao report sets out very well is that there's quite a lot of information out there, but it's quite hard to unpack. And I think there is an onus on us, and I think we're very supportive of the recommendations to try and bring that together in a bit more of a coherent story on a regular basis. And we're looking to publish early in the new year, a report that just sets out progress on the network infrastructure projects and timeliness and cost quarterly.
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Sarah Hall
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Sarah Hall
So our intention at the moment is to do that yearly. And there's a reason for that. These projects are very large and lots of things change all the time, and we want to make sure that we've got good data that the public can understand. So we think really is a suitable time frame, but we are open to developing that. We'll do the first one in February. Let's let's see if we're getting the messages clear enough for people on that.
And then we can build on that if that's helpful.
And then we can build on that if that's helpful.
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Clive Betts
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Clive Betts
Well, we have to think about that as a committee. I mean, one of the challenges I think always is if you leave it for a year, which really means you're talking about things that have happened more than a year before, if they're going wrong, it's then harder to actually pull them back and to comment on, on problems rather than, you know, deal with them on an immediate basis.
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Rupert Lowe
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Rupert Lowe
Thank you chairman. Yes. I should first of all disclose the fact that I, in my parliamentary disclosures, have had an investment in something called solar energy, which is a battery storage business , which has had untold trouble getting grid connections, which won't surprise you all. I also know a little bit about the way in which the grid operates, and I know how tight the margins are for either under demand or over demand and supply now coming in increasingly from more and more sources, particularly the wind farms and solar. And if you look at page, if you look at page 19, you can actually see since 2000 how the system has become so much more complex.
So not only are we getting different supply, i.e. less secure supply, we're also getting much more of it from different means. So I think that means that the grid balance is now absolutely crucial. And I want to raise the issue, which happened on the 23rd of June as my starter, where I am very concerned. You've produced a preliminary report. I think we're waiting for a more detailed report next year, but I, I think this House is here. Not only this committee is here to represent the House for taxpayer value. The House is here to protect, as our elected MPs, the interests of the British people.
Now, I'm not happy that that report you've done so far, I think it's just Ofgem and Nisa that have produced this report. It's a top down report. You've had whistleblowers who are concerned about what's going on. That's a that's a persistent drumbeat. So I, I am very concerned that if the grid goes down and I think it was extremely close, from what I understand, on the 23rd of June, we get a total blackout. We don't know how long it takes you to bring the grid back up again. People die. Basically, data centres go down. Everything relies on our power grid.
So I, I'm I'm going to recommend that this committee requests an independent review by independent engineers who actually understand the way in which the grid operates so that you can we can Parliament can get complete reassurance. I'd like all the information that both Ofgem and Niso use to make this preliminary judgment, and I think it needs to be independent. It needs to then be made to the House of Commons so that we as sitting MPs know that the people who we represent are not being put at unnecessary risk, which I, I, I think arguably, possibly we are.
So that's what I wanted to start to say. So that that's going to be something I'd like you all to think about. I don't know whether you want to comment on that. Now, before I go on to my next question, unfortunately for you, if you've got two more questions from me, okay.
So not only are we getting different supply, i.e. less secure supply, we're also getting much more of it from different means. So I think that means that the grid balance is now absolutely crucial. And I want to raise the issue, which happened on the 23rd of June as my starter, where I am very concerned. You've produced a preliminary report. I think we're waiting for a more detailed report next year, but I, I think this House is here. Not only this committee is here to represent the House for taxpayer value. The House is here to protect, as our elected MPs, the interests of the British people.
Now, I'm not happy that that report you've done so far, I think it's just Ofgem and Nisa that have produced this report. It's a top down report. You've had whistleblowers who are concerned about what's going on. That's a that's a persistent drumbeat. So I, I am very concerned that if the grid goes down and I think it was extremely close, from what I understand, on the 23rd of June, we get a total blackout. We don't know how long it takes you to bring the grid back up again. People die. Basically, data centres go down. Everything relies on our power grid.
So I, I'm I'm going to recommend that this committee requests an independent review by independent engineers who actually understand the way in which the grid operates so that you can we can Parliament can get complete reassurance. I'd like all the information that both Ofgem and Niso use to make this preliminary judgment, and I think it needs to be independent. It needs to then be made to the House of Commons so that we as sitting MPs know that the people who we represent are not being put at unnecessary risk, which I, I, I think arguably, possibly we are.
So that's what I wanted to start to say. So that that's going to be something I'd like you all to think about. I don't know whether you want to comment on that. Now, before I go on to my next question, unfortunately for you, if you've got two more questions from me, okay.
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Speaker 1
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Speaker 1
Well, what I suggest you do is, you know, we should reflect on that. We should reflect on that, come back to you in a more structured way. But but one thing I'd say up front is my secretary of state is very aware of the seriousness of security of supply. So in a number of dimensions, this department is fully focused on making sure that we minimise the risks of what you are describing. I suggest we do is just ask Tim and Finton to talk about the two reports that have been commissioned so far, and what's going to happen next, and then we should come back and reflect on what you were asking for and respond properly.
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Speaker 3
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Speaker 3
Accept perhaps kick off and respond to some of that. Because look, I think what we absolutely share is the importance and seriousness of this. You know, keeping the grid operating and keeping the lights on is absolutely critically important for people's welfare. And as you say, it potentially affects, you know, people's ability to operate organisations, hospitals. So this is this is critical stuff. We absolutely recognise that Parliament has given us a role as Ofgem to regulate the energy systems operator. We have had a a near miss incident and we have sought information and we are scrutinising that, I think is absolutely right that we scrutinise that really carefully.
We follow all the evidence and we use the engineers that we have in Ofgem and independent engineers ourselves to investigate that, and we are in the process of doing that. It is a complex investigation and it's thorough and it needs to be thorough for all the reasons. If you set out now, clearly, if Parliament, which is to give that role to somebody else, that's that's entirely up to them. But that is where we are at the moment. We have published our interim report, and we are continuing to examine the evidence.
We follow all the evidence and we use the engineers that we have in Ofgem and independent engineers ourselves to investigate that, and we are in the process of doing that. It is a complex investigation and it's thorough and it needs to be thorough for all the reasons. If you set out now, clearly, if Parliament, which is to give that role to somebody else, that's that's entirely up to them. But that is where we are at the moment. We have published our interim report, and we are continuing to examine the evidence.
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Rupert Lowe
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Rupert Lowe
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Speaker 3
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Speaker 3
In terms of transparency. We've had a number of incidents in the past as Storm Arwen, for example, where we where we've investigated and we always adopt. The same approach was to try and get the information out into the public domain as soon as we can, as soon as we are confident it's accurate. We have just done that. We have just published all the information we are looking at. We're now going through the next stage into the investigation.
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Speaker 4
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Speaker 4
Well, maybe just to build on what what Tim said. So we take our responsibilities as in operating the system incredibly seriously. And we understand absolutely the importance of that role to, to society and the economy. We fully support Ofgem's review of the system. We've provided them with all of the data. They will continue to examine it, produce a final report. They have their own panel of independent experts that will review it. And we have no issue in terms of transparency or availability of data or anything like that. So we absolutely support the investigation that's ongoing.
The thorough nature of it and the transparency associated with all of that. Just as Jonathan said, to to touch on the other report that was published at the start of the week, which was the Eversheds report into the whistleblowing at Niso, just to reflect that, firstly, it didn't substantiate any of the specific allegations. However, it did point to some issues within cultural issues that we absolutely need to address. And the board, the executive, myself as chief executive, are fully committed to acting on those recommendations, acting on the themes that came out of the report and addressing those issues with staff in a very, very open and transparent way, leveraging the experience of the trade unions as well in terms of how to build, speak up policies that work for the type of organisation that we are.
So we welcome the publication of the report. It was published in full in the interest of full transparency. And we continue to to work on the specific recommendations that were were included within it.
The thorough nature of it and the transparency associated with all of that. Just as Jonathan said, to to touch on the other report that was published at the start of the week, which was the Eversheds report into the whistleblowing at Niso, just to reflect that, firstly, it didn't substantiate any of the specific allegations. However, it did point to some issues within cultural issues that we absolutely need to address. And the board, the executive, myself as chief executive, are fully committed to acting on those recommendations, acting on the themes that came out of the report and addressing those issues with staff in a very, very open and transparent way, leveraging the experience of the trade unions as well in terms of how to build, speak up policies that work for the type of organisation that we are.
So we welcome the publication of the report. It was published in full in the interest of full transparency. And we continue to to work on the specific recommendations that were were included within it.
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Rupert Lowe
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Rupert Lowe
Well, thank you for that answer, because I think you have got a cultural problem, probably, and that's why I think we need this independent report. But anyway, I will leave it at that and we'll see what the committee comes up with. So so my next question relates to page 38, paragraph 2.2. In 24, Niso identified eight projects that it said should be accelerated because doing so would reduce constraint costs. Now, as we know, constraint costs are currently huge and according to the Nao, by 2030, I think we're going to be talking about constraint costs rising from 1.9 billion to something like 7.8 billion by 2030.
That's in the report. Two years later, those projects remain scheduled to be delivered beyond 2030. So were those recommendations realistic, or were you ultimately hamstrung by basically planning regulation and the delivery sort of structures that you require to, to, to make that happen?
That's in the report. Two years later, those projects remain scheduled to be delivered beyond 2030. So were those recommendations realistic, or were you ultimately hamstrung by basically planning regulation and the delivery sort of structures that you require to, to, to make that happen?
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Speaker 1
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Speaker 1
So I might just start and then again, perhaps Vince and Tim just want to come in from their perspective. This is a major program overall, as I say, we, we had a, we did have a first task of the regulator having to change its processes and speed up its approvals. And if you look back in our history, it took a long time to improve one project. We approved a number of projects in bulk to make sure that we could allow the finance to flow. We also developed a system. This is in Ofgem. Ofgem also developed a system that allowed us to do that faster, and I'm sure Tim will talk about that.
But there are other barriers out there that are familiar to this committee around planning and around a supply chain that is under huge pressure globally, and our job is to make sure we create the right incentives to get this stuff delivered, while accepting there are some things that we're all going to need to work through. It might be helpful, Tim, just to talk in specifics.
But there are other barriers out there that are familiar to this committee around planning and around a supply chain that is under huge pressure globally, and our job is to make sure we create the right incentives to get this stuff delivered, while accepting there are some things that we're all going to need to work through. It might be helpful, Tim, just to talk in specifics.
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Speaker 3
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Speaker 3
Yeah, I mean. just just to sort of step back a little bit. So the challenge that we've all collectively got is that building out the network, the transmission network takes a long time. These are big projects to upgrade the network to build across the country, to put in place pylons, pylons, and things that that takes the best will in the world. That's going to take 8 to 10 years. And obviously generation can be brought on stream quicker than that. So that's the sort of conundrum in a sense we have. I mean, what we have done is, is look at the sort of three things that that are needed to get projects delivered quickly.
So one is regulatory approvals. So we introduced our accelerated strategic transmission investment programme. Lots of acronyms here. I apologize. But that was really to try and get these projects going more quickly. And we've also the other challenge, the second challenge, I think the supply chain. So getting companies able to get their supply chains in place early. So we've introduced an advanced procurement mechanism to help them do that. And then the third issue, as you, as you alluded to, is planning and consent, because these are these are big projects, and the government has taken some steps there, and we're looking to see how that plays through.
So we're trying to get these projects going as quickly as possible, and then holding the transmission companies to account for delivering. But it is challenging for the reasons I've.
So one is regulatory approvals. So we introduced our accelerated strategic transmission investment programme. Lots of acronyms here. I apologize. But that was really to try and get these projects going more quickly. And we've also the other challenge, the second challenge, I think the supply chain. So getting companies able to get their supply chains in place early. So we've introduced an advanced procurement mechanism to help them do that. And then the third issue, as you, as you alluded to, is planning and consent, because these are these are big projects, and the government has taken some steps there, and we're looking to see how that plays through.
So we're trying to get these projects going as quickly as possible, and then holding the transmission companies to account for delivering. But it is challenging for the reasons I've.
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Speaker 1
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Speaker 1
I don't think it is. Actually, I think you've got to look at the delivery schedule as a whole. And I think in the report we we you can see the progress that's been made through the system. But is the planning system ideal in the UK? No, we we need to continue to work through it. And, and the government has made changes. But some of those changes are going to come in later than we would like for this programme.
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Speaker 2
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Speaker 2
The three projects that were identified as being necessary for 2030, which were always off track for 2030, were three in East Anglia. So Norwich to Tilbury, which is split into two projects, and then the Sea Link project, which is the offshore connection in East Anglia. And those three projects have not proved possible to accelerate to 2030.
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Rupert Lowe
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Rupert Lowe
So I think I think the next question is for for Emily if that's all right, paragraph 17 I'm really referring to here. So the barriers to upgrading the grid are now well understood. The Nao sets them out clearly in your professional judgment. Which single barrier poses the greatest threat to successful delivery to the grid upgrade programme by 2030?
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Speaker 2
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Speaker 2
Yes. Thank you. And we've been doing a load of work across the programme since we were set up, based on the report that Nick Windsor did, as our Electricity Networks Commissioner on, how can we speed up delivery across every bit of the value chain. So through that, we've been looking at everything from, as Tim talked about, regulatory consenting, supply chain planning consents. I think as as Jonathan's alluded to, planning and consenting is probably the most challenging because there's risk remaining despite a huge amount of reforms that we've taken forward, which I can talk about if helpful.
Some of those are still going through the system and will take time before they can actually impact. We've actually got a package of land rights and consents measures for networks which are ready to go once we get the parliamentary time, but they haven't yet got into Parliament. So there's time to get the reforms in place. And then even with all the reforms that we're taking forwards, there remains a risk through the planning system that projects may not get consent or may be challenged at the end of it. So I think that's a risk that we can't fully de-risk whatever we do.
Some of those are still going through the system and will take time before they can actually impact. We've actually got a package of land rights and consents measures for networks which are ready to go once we get the parliamentary time, but they haven't yet got into Parliament. So there's time to get the reforms in place. And then even with all the reforms that we're taking forwards, there remains a risk through the planning system that projects may not get consent or may be challenged at the end of it. So I think that's a risk that we can't fully de-risk whatever we do.
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Speaker 4
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Speaker 4
Think it's a relatively small number in the context of the overall connection. Q I think as the transmission companies have done the re engineering analysis on the reformed. Q we haven't seen ability to bring those transmission projects in any earlier. It's akin to the previous conversation. These are really big infrastructure projects and the ability to accelerate them is, is, is difficult. So we haven't seen a large number of projects get Q dates earlier.
10:27
Rupert Lowe
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Rupert Lowe
That would make sense, wouldn't it? Because otherwise what's going to happen is projects that basically get completed, you're going to end up paying more and more in constraint payments, which is a complete waste of taxpayers money. If you don't get this, this, this chain, this priority list, right. And it's disappointing that there haven't been any we can't find any I so if you keep getting that wrong, you're going to end up with constraint payments going through the roof.
That seems to me to be quite clear. Would you agree with that?
That seems to me to be quite clear. Would you agree with that?
10:28
Speaker 1
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Speaker 1
So so if you step back from it, the connections reform really is the is the first time that projects have been prioritized and and attached to what is a limited grid resource. We know that we know the grid resources constrained right now. So the entire job of our networks and generation programme is to better align all of this. So yes, we need that prioritization. I think it's worth saying that although we haven't seen projects come forward, we've taken enormous amount out of the queue, and the queue was filled up with projects that I think we all knew were not necessarily going to make it.
So we we have done that bit, but I think both on the demand and the supply side, you're right. We have this prioritization question. And, you know, I think my Secretary of state has been as clear as I possibly can be with me that she doesn't want to do this all at any cost. She wants to make sure we manage that. And that's what this process is designed to do.
So we we have done that bit, but I think both on the demand and the supply side, you're right. We have this prioritization question. And, you know, I think my Secretary of state has been as clear as I possibly can be with me that she doesn't want to do this all at any cost. She wants to make sure we manage that. And that's what this process is designed to do.
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Speaker 2
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Speaker 2
So that is a good question. I think I think a risk, which we've come to understand a lot better is the system access risk. So this is the process by which, when you add anything new to the transmission network, whether it's a new generation, a reinforcement of the network, or a new demand or generation connection, you have to take part of the grid offline in order to make that change. That is an incredibly complex process, which is managed by Nyiso across the grid as a whole, as we're adding more and more to the grid, especially as we come up to 2030, that becomes more difficult to manage.
So that is a risk that we we have known about for a while, but there's definitely come up the agenda in recent over the past year. And we are working very intensely with Nyiso on a much more strategic plan for system access to get ahead of that.
So that is a risk that we we have known about for a while, but there's definitely come up the agenda in recent over the past year. And we are working very intensely with Nyiso on a much more strategic plan for system access to get ahead of that.
10:30
10:30
10:30
Clive Betts
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Clive Betts
Very much. Pick up the two issues there. First of all, you mentioned the problems of planning, and you can't guarantee what planning authorities are going to do when they get an application. They can't hold it up for a long time. And often, you know, we accept that proposals to stick pylons in front of someone's home aren't always the most popular proposals. So this is clearly a very important project for the country.
So why is it not a nationally significant infrastructure project?
So why is it not a nationally significant infrastructure project?
10:31
10:31
Sarah Hall
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Sarah Hall
So the transmission networks, they make their choice about how best to get consent in a local area. So the schemes are obviously very complex and they are applying for many development direct dco's, but they're also applying for some local consents as well. They work out how the best way to manage that through the system, but at least eight of them are being treated as nationally significant infrastructure project.
10:31
Clive Betts
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Clive Betts
That's just another example of the fragmentation of this, again, where everybody's got to do all the the right bits at the right time for it all to add up to a successful operation. Why don't why doesn't the whole scheme an Nsip? So there's actually an overall delivery of IT responsibility probably with the department.
10:31
Speaker 1
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Speaker 1
Well, I mean, I think there are a set of choices you need to make with each project, and those trade offs will be different. And I think it's really and I suppose that's the the point I'd want to make here at this committee is, is although there are challenges and planning is one and supply chain is another, the transmission companies are the ones responsible for delivering this. So we have to work with them to take their advice on the best way to deliver these projects. Now, in any circumstances, we can't deny that this is a very complex infrastructure upgrade that we are pursuing.
We're pursuing that because we think that is the best value for the country and the best value to protect against some of the geopolitical risks that we see. So happy to come back to the committee in detail on how we've got to that conclusion, but I think we have to accept that.
We're pursuing that because we think that is the best value for the country and the best value to protect against some of the geopolitical risks that we see. So happy to come back to the committee in detail on how we've got to that conclusion, but I think we have to accept that.
10:32
Sarah Hall
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Sarah Hall
Maybe just to build on one point, you've acknowledged yourselves, Mr. Betts, that these these schemes are not easy in local communities where they exist. The network companies are responsible for very detailed engagement locally with the communities. That should include trying to get the minimum impact locally and thinking about routing. If you deal with this as one scheme as a whole, that would undermine those local conversations that do need to happen.
10:32
10:33
Speaker 1
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Speaker 1
Well, I think we're happy to come back to the committee on the specifics of how those criteria apply, but I think the important point is, although the planning system is challenging. Just come back to what we said. We've just got to remember that the way the transmission companies handled the planning regime, the way they what they submit, how they engage with local communities is a critical factor in their success. So part of us holding them to account is not simply sitting back and saying planning is difficult. Therefore, that's okay. We've got to make sure they're doing their job right.
10:33
10:33
10:33
10:34
10:34
Speaker 4
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Speaker 4
So maybe two, two things. One, we are working very hard to try to make sure that that number is reduced as much as possible. And there are a range of things, both short term and long term, that we at Nyiso are doing and doing in coordination with and Ofgem, and that is focused on absolutely minimizing those costs. As I say, short term and long term.
10:34
10:35
Speaker 4
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Speaker 4
So that is the estimate of constraint, because the only bit I was going to add, chair, was that the significant portion of that is, is paid actually to gas fired generation to to fire up. So in addition to pulling back on the wind farms, the majority of the cost is due to having to start gas fired power stations in place.
10:35
Speaker 1
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Speaker 1
Of them. You know, I think you we would make the point that that through plans we have to minimise constraint costs. We are working on a number of things to bring that number down. So we're not leaving that number at 7 to 8 billion. We are doing things to make sure we minimise it and can talk about some of the technological changes. The simple thing you've got to do is maximize the efficiency of the grid you have.
So if you can use the grid more, your constraint costs go down by by a proportionate amount.
So if you can use the grid more, your constraint costs go down by by a proportionate amount.
10:35
10:36
10:36
Speaker 4
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Speaker 4
So we are rolling them out. So we are working with the transmission companies at the moment. They are rolling out as we speak, dynamic line rating on their transmission lines, and that is technology put on the line that allows you to maximize the amount of power that can be transmitted down it based on the actual condition and sag of the line.
10:36
10:36
10:36
10:36
Speaker 4
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Speaker 4
So the estimate that I gave you is the one that was produced as part of the Clean Power 2030 advice that we provided to government in 2024. We update our forecasts annually and the next one is due in the next few months, at which we will do another analysis and include the things that have been committed within it.
10:37
10:37
Speaker 4
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Speaker 4
It it hasn't moved significantly between that one and the last one that we produced. But as I say, we have worked now to get the dynamic line rating date into the transmission company's plans. We've worked with with Ofgem and the department to get that in. And we are doing that. And our intention is that that would feed into the state of the market report that Tim mentioned earlier.
10:37
10:37
Speaker 1
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Speaker 1
And it's worth saying that, you know, those reports are done on a static timetable and timetables for generation move as well as timetables for networks. And that's what we've got to sort through to come up with an updated estimate. But I need to make it really clear to this committee that we're not happy with that figure, and it is something that we are trying to bring down.
10:37
Clive Betts
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Clive Betts
Right. So one of the problems, and maybe Tim Jarvis, I don't know, you've got a business case for each individual grid upgrade, but Nisa can't tell you what the costs and the financial implications of those upgrades would be. What would the cost of not doing them. Why is that information not available? It's one of these things, again that everyone seems to be a bit responsible, but the information flows aren't happening.
10:38
Speaker 3
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Speaker 3
Yeah, and I think that's what the Nao report brings out, is that we need to bring together the work that we're doing on the upgrades to and in terms of the timeliness of the delivery and the costs of them against the generation that's coming on stream and what those two things together mean for constrained costs. So those are the two bits. So we are we are working with Nisa and the government, as I say, for early next year, to try and bring some of that together so that we can update this and then start to do so on a regular basis and manage the system to make sure it's being used as efficiently as possible as possible, and to drive down those those constraint costs as much as we can.
10:39
10:39
Sarah Hall
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Sarah Hall
Yeah. So what we do is as we're constantly monitoring both delivery and costs, as we think about whether or not this set of investments remain in good interest for the consumers and obviously with with cost pressures that we see in our own lives as well as in projects, that's a very important thing to do . As well as focusing on delivery. If we talk about the accelerated strategic transmission projects, the really big ones out of the 88, those ones continue to offer really, really strong value for money for consumers. Our latest version is about 4 to 1 of those.
10:39
10:39
Sarah Hall
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Sarah Hall
So part of what I think part of what now is recommending is to keep on the journey we're on at the moment of having coherent joined up strategic planning. And as we move forward into the next year and we get an overarching spatial energy plan that will give us a much better joined up systems. But yes, in general, we get the information we need from Miso, and we're just bringing that together at a holistic level now. Yeah, thank you very much. I'm just going to continue around the issues of the constraint costs and this overall impact.
So obviously, from a consumer point of view, everybody's worried about the cost of living businesses too about energy prices. And real priority is obviously to get down energy bills. My understanding is that at the moment there's this planned 70 billion of investment costs, which the consumer is obviously bearing. But in addition, there is this possibility of a further additional amount of money of these constraint costs. So there's a figure ten on page 36 of the report, tries to look at the sort of impact on consumer bills and what the total savings would be, and comes up with this sort of estimate that if we could accelerate some of these projects, that it would have a consequence of reducing constraint costs and have come up with a figure of sort of saving £30 a year.
Well, sounds like not much of a saving, although obviously anything is welcome. But there are also quite a lot of uncertainties and assumptions behind that, not least the price of gas. So I wondered, I think it may be Tim and Beatrice who can best answer this. How confident are you in these assessments about the sorts of savings that an acceleration and weighing up the sort of consumer price versus these long term?
So obviously, from a consumer point of view, everybody's worried about the cost of living businesses too about energy prices. And real priority is obviously to get down energy bills. My understanding is that at the moment there's this planned 70 billion of investment costs, which the consumer is obviously bearing. But in addition, there is this possibility of a further additional amount of money of these constraint costs. So there's a figure ten on page 36 of the report, tries to look at the sort of impact on consumer bills and what the total savings would be, and comes up with this sort of estimate that if we could accelerate some of these projects, that it would have a consequence of reducing constraint costs and have come up with a figure of sort of saving £30 a year.
Well, sounds like not much of a saving, although obviously anything is welcome. But there are also quite a lot of uncertainties and assumptions behind that, not least the price of gas. So I wondered, I think it may be Tim and Beatrice who can best answer this. How confident are you in these assessments about the sorts of savings that an acceleration and weighing up the sort of consumer price versus these long term?
10:41
Speaker 3
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Speaker 3
Yeah. I mean, you're right that there's there's lots of assumptions in here and things move. But I think the, the, the overriding message of this report and indeed our own analysis is that the costs of not doing these upgrades to consumers is significantly higher than the cost of doing them, because ultimately, we need to build out our network to accommodate new sources of generation. Now, the exact numbers will, as you say, they are subject to a number of sensitivities. But clearly, as I think figure two sets out by upgrading this network, the. There will be a net benefit to consumers compared with not doing it.
10:42
Sarah Hall
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Sarah Hall
And the answer to Clive's question. You talked about one mitigation that you are developing is this dynamic line rating. What are. The mitigations are being developed? I mean, not least, how are you going to get better value for money when you do have to switch on the gas? You know, are there other things that you know, you're looking at as mitigations that could further bring down the constraint costs?
10:42
Speaker 3
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Speaker 3
So I think that the constraint costs are driven by two factors, really, one of which is the extent to which you can use the system efficiently and move things, move the energy from where it's being generated to where it's needed. The more we can do that, the way that's how the primary reason we drive down constraint costs. And that's why getting these programs delivered. And I think, as the Nao concludes, very clearly, value for money of this programme is about delivery of these projects. The other factor is that it is the price of gas, because that is primarily what is driving at the moment.
The size of these constraint costs, because the amount that we're paying and we as we know we are in a world where we are paying significant amounts for gas at the moment, global prices trebled in the in the last sort of nine months. So this programme reduces our reliance on gas. And that is why it is so important in the long term, I think, to get these these network upgrades done.
The size of these constraint costs, because the amount that we're paying and we as we know we are in a world where we are paying significant amounts for gas at the moment, global prices trebled in the in the last sort of nine months. So this programme reduces our reliance on gas. And that is why it is so important in the long term, I think, to get these these network upgrades done.
10:43
Speaker 1
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Speaker 1
So the decision yesterday was based on the contribution to security of supply and the compatibility with our climate goals. So I think, as we've probably said at a number of committees previous to this, we don't think it has a major impact on price because that price really is dependent on global markets.
10:44
Sarah Hall
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Sarah Hall
Given that tackling climate change , as well as some of the economic growth, is so critical to a why is it that often current doesn't currently include these sort of wider benefits of reducing carbon emissions and economic growth in your wider value for money assessments, a cost benefit value for money for systems we're talking about in in this report here are sort of the most simple, basic how, what do you get the value out of just reducing those constraint costs? But you're right there underestimates of some of the other benefits that are there as well. So we've recently produced guidance for network companies about how they can think about the value of the growth benefits alongside.
Obviously, at the moment, our our primary duty is to the consumer, but that's about to be rebalanced. And so growth and net zero will be equal duty. So we're getting ready with all the companies actually to help them get the local best local benefit out of this. You may have seen this week the industry produced a sector growth plan as well about actually the jobs, the local opportunities that they can see unfolding as a result of this investment, which we're very supportive of. And how does decentralised generation play into this? Does it help with resilience?
Obviously, I see in my own constituency, I've got solar panels going on schools, hospitals, local buildings. Obviously all part of the warm homes plan is to also increase the sort of domestic use of this. How does this, you know, how does that help build our resilience whilst these large infrastructure projects are going ahead at a slower, perhaps than desirable pace?
Obviously, at the moment, our our primary duty is to the consumer, but that's about to be rebalanced. And so growth and net zero will be equal duty. So we're getting ready with all the companies actually to help them get the local best local benefit out of this. You may have seen this week the industry produced a sector growth plan as well about actually the jobs, the local opportunities that they can see unfolding as a result of this investment, which we're very supportive of. And how does decentralised generation play into this? Does it help with resilience?
Obviously, I see in my own constituency, I've got solar panels going on schools, hospitals, local buildings. Obviously all part of the warm homes plan is to also increase the sort of domestic use of this. How does this, you know, how does that help build our resilience whilst these large infrastructure projects are going ahead at a slower, perhaps than desirable pace?
10:45
Speaker 1
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Speaker 1
So I think decentralised energy has a big role to play in our system. I think it does help with both cost and security of supply. You know, we are beginning we've always seen the cost of solar and batteries continuing to come down. So they are competitive options for creating a diverse energy supply have to be frank, there are this is a very fast changing system. There will be challenges to make sure. I think as we've been pointed out, there's many, many different sources of energy now, and those need to be managed by Nyiso. But overall, we think this is a big contribution to the country's energy future, which gets us to a more stable place than we are now, given our reliance on the markets we rely on today.
10:46
10:46
Speaker 4
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Speaker 4
I know I'd agree what Jonathan said, and I think the other maybe medium term thing is the rollout of the regional energy strategic plans allows us to look at this in a very structured way and make sure that the development of those resources, in particular regions is appropriate to the energy context of that region, but also fits within the overall national policy objectives. So I think that is that allows us to look at those local resources in a much more joined up and strategic way going forward.
10:46
Sarah Hall
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Sarah Hall
And I don't want to sort of pinch my colleague's question, but and I can maybe hear from your accent, but I understand in some other countries, maybe Ireland being one of them, that they're doing more to coordinate and indeed provide incentives on businesses like data centres to actually better invest and coordinate in the join up with renewable projects. So is that what what you mean is possible with these local. Is that that local coordination going to be able to push towards a better joined up approach?
10:47
Speaker 4
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Speaker 4
So I think so, yes. I think specifically on data centres, you see many examples around around the world. I think Ireland is one where actually getting flexibility from those data centres as they connect into the energy system, allows you to facilitate them in a much easier way, with less burden on the system and therefore less cost for consumers at the end of the day. And those are some of the things that we are looking at and talking to both colleagues here about.
10:47
10:48
Rupert Lowe
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Rupert Lowe
Thank you Clive. I think my question is probably for Fintan, but I again, permanent secretary, he can decide who's who. You're going to sling it down the line to. I've got a big thing about data centres. I, I think data centres are going to be the key to the future. And I know we read about a lot of the investment in America. When you look at our investment in data centres versus Europe's, China's or America's. We come out very badly, largely because we've got extremely expensive energy. And then I read that the current government says it's committed to the following more housing, more AI growth zones and data centres, more economic growth, more electrified transport, more electrified heating, more overall electricity supply, more grid infrastructure, more public infrastructure, greater energy security, greater system resilience.
Clean power by 2030 and net zero by 2050. Sounds a bit like having your cake and eating it, but that's what they say they're committed to. And then I read in articles like this in The Telegraph earlier this month about the fact that there seems to be a row going on within the government about whether or not it's energy security or whether or not it is net delivery of net zero, which comes at the top of the agenda. So there have been some criticisms, by the way, of so, so so I my question is, do you think the government really knows what it wants to achieve?
I mean, are they more intent on delivering energy security, or are they more intent on delivering net zero within their stated timetables?
Clean power by 2030 and net zero by 2050. Sounds a bit like having your cake and eating it, but that's what they say they're committed to. And then I read in articles like this in The Telegraph earlier this month about the fact that there seems to be a row going on within the government about whether or not it's energy security or whether or not it is net delivery of net zero, which comes at the top of the agenda. So there have been some criticisms, by the way, of so, so so I my question is, do you think the government really knows what it wants to achieve?
I mean, are they more intent on delivering energy security, or are they more intent on delivering net zero within their stated timetables?
10:49
Speaker 1
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Speaker 1
I think that's probably one for me, actually, before I what do you think? I mean, we are very clear that the objectives for the energy system are to deliver our climate goals, including net zero, whilst maintaining security of supply and minimizing costs for customers. Now, there are no doubt there are trade offs there, but there are also huge synergies in that. And you come on to the point about data centres, for example, and this department and this government is incredibly enthusiastic about making sure we can maximise the value of data centre investment in the UK.
10:50
10:50
Speaker 1
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Speaker 1
Well, there's a range of different things we've been asked for by, by, by, by major global companies on this. And there is huge enthusiasm for the UK for a number of reasons, including our wider regulatory environment. But the point is that can also be a positive contribution to some of the issues that we're facing today. So if you can absorb power where there is excess power, for example, with the data centre, we think that can make a positive contribution to the system as a whole. So I think we are actually clear. We're not we're not underestimating the challenge, but our job is to make sure we balance those things and we deliver all of the goals of government, and that's what we're trying to do.
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10:50
10:51
10:51
Speaker 4
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Speaker 4
I don't think they necessarily contradict each other. No I think that and you can see that as we build out more you need a balanced portfolio of of energy resources. But you as you can see, gas prices, volatile gas prices have flowed through into people's bills. And to the extent that we can build out a energy generation portfolio here in the UK that is not influenced by those, then that is a good thing and can meet the net zero objective. So I think it is incredibly important that you do both. I think a pursuit of net zero that doesn't maintain security of supply will lose confidence of of, of society.
But I think you can do both.
But I think you can do both.
10:52
Rupert Lowe
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Rupert Lowe
Tim talks about the price of gas. We're not we're not producing our own gas anymore. That's that's a decision we've made. So so so look, I mean, I, I think there's a lot of confused thinking. And I think, you know, my question is really, where do the interests of and value to the British taxpayer lie in all this. And I and I, we see from the NEA report people are paying more as a result of the upgrade to the grid and all of the incentives to move to net zero, which I think has become an overarching issue.
And I and I think I'm not clear on, on, on quite what is prioritized. That's why I think we need this independent review as to what's going on within, within, within your organisations.
And I and I think I'm not clear on, on, on quite what is prioritized. That's why I think we need this independent review as to what's going on within, within, within your organisations.
10:53
Speaker 1
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Speaker 1
Well, well, if you look at the reserves in the North Sea, in any case, there is going to be the need to both import and rely on global markets. We are now in our second energy crisis, and I have in this job and previous jobs, I've had many commentators telling me gas is going to be cheap today. It is incredibly expensive. I think ministers are clear, actually, of the synergy between a strategy that ultimately diversifies your generation, prevents us relying on one source and one internationally set price to one that is more diversified. And we think that synergizes both cost security and net zero.
10:53
Rupert Lowe
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Rupert Lowe
Okay, so so we this comes back, doesn't it, to I mean, we aren't going to get our data centres unless we get the grid connections and we, unless we get our structure working properly, that's the key. And we will be left behind. This country will be left behind. It's already happening. You cannot rely on other people's servers. You cannot rely on other people's AI. You need your own AI. If you're a sovereign nation, you need to protect your interests through your AI. And we can't deliver that if we haven't got an effective grid and a plan to actually make it possible for people to build them.
And that I can't see we have.
And that I can't see we have.
10:54
Speaker 1
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Speaker 1
Well, and that is why we're working at pace to make that happen. There is work between DBA and DNS to make sure that we can meet the data centre needs. We are having very high level conversations with investors to make sure we can make those circumstances happen. I think we all accept that we're going to need data centres, and we are going to need AI not only to to provide all the services customers need, but also to improve the productivity of our economy.
And that is fully behind that.
And that is fully behind that.
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10:55
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10:55
Sarah Hall
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Sarah Hall
Yeah, it was really just in terms of jobs, which I think was a, you know, a point here, obviously this 70 billion. Yes, there are lots of potential benefits, but. Getting high skilled jobs into all parts of the country is a is a key priority. So what estimates have been made about the sorts of job requirements to deliver on this £70 billion of investment? And are you confident as to where those people are coming from?
10:55
Speaker 1
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Speaker 1
I perhaps say something up front, but I'll hand over to be look, we are really cognizant of the scale of this investment, and as a department, we are really keen to make sure that we maximise the economic opportunities. So we're working with Ofgem and with the network companies to do so. And we can talk about the plans that were released this week.
10:56
Sarah Hall
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Sarah Hall
Yeah. So the network companies obviously do their own detailed skills planning. They plan that out as part of our price controls and think about what they need both directly and in their supply chains. And what they've released this week is, is a view of what opportunities there are for additional really high value jobs in the UK. And they're looking at sort of 210,000, I think it is additional skilled jobs by 2035. So that's about can we get the good investment here, build out more of high end manufacturing in the UK? We've got a good chunk of that already.
We're building on a base, but there's definitely room to grow that as well. And that's what the network companies are saying together with industry, that they're ready to look for all the opportunities to do that over the next few years. What are they actually doing to make sure that those people are coming through with skills in terms of working with skills, England colleges themselves, investing in apprenticeships? Is that part of this plan? I haven't seen it. Absolutely. So each of the individual companies themselves have their own apprenticeship plans. But what they're now coming together is saying actually, should we should we combine forces here?
Should we do some joint training of skills of some of our specific skill areas that we know we're going to need more of? They've started to develop a plan. They're going to start presenting us to Emily and I over the next couple of weeks, actually, so we can think about how we can help support that and think about how that all comes together, because obviously that's the work that nuclear have done. They've said as a sector, these are jobs that we need, and I presume that it would be pretty significant constraint, whether it's construction, engineering or other skills.
If they. So the sector growth plan, in my mind, is really. It's an exemplary example of people all coming together. There's manufacturers on that. They've developed that plan together with the network companies, with the network associations as well. And they're now committed moving into a delivery phase. They're going to get a delivery partnership up and running and really trying to unlock all those benefits. But they've got to happen. You need the national plan, but you really need the action locally. And that's what we want them to do through this. Think about the economic local benefits as well as the local disruption.
That happens because we all want good, high skilled jobs in each of our constituencies, you know, and obviously, Bradford and Shipley have a good tradition of manufacturing. So we'd like to get reindustrialisation in the North, wouldn't we, Clive? So absolutely.
We're building on a base, but there's definitely room to grow that as well. And that's what the network companies are saying together with industry, that they're ready to look for all the opportunities to do that over the next few years. What are they actually doing to make sure that those people are coming through with skills in terms of working with skills, England colleges themselves, investing in apprenticeships? Is that part of this plan? I haven't seen it. Absolutely. So each of the individual companies themselves have their own apprenticeship plans. But what they're now coming together is saying actually, should we should we combine forces here?
Should we do some joint training of skills of some of our specific skill areas that we know we're going to need more of? They've started to develop a plan. They're going to start presenting us to Emily and I over the next couple of weeks, actually, so we can think about how we can help support that and think about how that all comes together, because obviously that's the work that nuclear have done. They've said as a sector, these are jobs that we need, and I presume that it would be pretty significant constraint, whether it's construction, engineering or other skills.
If they. So the sector growth plan, in my mind, is really. It's an exemplary example of people all coming together. There's manufacturers on that. They've developed that plan together with the network companies, with the network associations as well. And they're now committed moving into a delivery phase. They're going to get a delivery partnership up and running and really trying to unlock all those benefits. But they've got to happen. You need the national plan, but you really need the action locally. And that's what we want them to do through this. Think about the economic local benefits as well as the local disruption.
That happens because we all want good, high skilled jobs in each of our constituencies, you know, and obviously, Bradford and Shipley have a good tradition of manufacturing. So we'd like to get reindustrialisation in the North, wouldn't we, Clive? So absolutely.
10:58
10:58
11:06
Speaker 1
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Speaker 1
Plan those in good time. Now, that wasn't where we were in 20 1516. Where we were was a context that looked very different from the one it does today. But it is one that I think we need going forward. And coming back to the point about jobs , in my mind, you need strategic planning to make sure you understand what you can build and you can get it consented in time. You need that to make sure you integrate supply chain so you can maximize value for money. But you can also then take advantage of the economic opportunities.
So in terms of .
So in terms of .
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11:07
Anna Dixon
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Anna Dixon
The Electricity Act, when these transmission companies were privatised. I can't help but see some parallels with, you know, the water companies, and we've had Ofwat in here multiple times looking at the failures of water regulation. And again, you know, we're in a situation, obviously with water where we haven't made those long term. investments as a country in reservoirs. And, you know, this market approach seems to have failed. So would you. accept that that market approach has failed to deliver the long term investments in .
11:08
Speaker 1
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Speaker 1
The grid that have been known about and needed for more than 15 years? So I think that, you know, as CEO of Ofgem, I should let him come in and talk about what Ofgem did, but perhaps I'll just talk about what I think we changed. I think we changed our approach in 2020. So on the back of the increasing ambition of government on net zero, we commissioned a set of reports that actually began the strategic planning process. So we commissioned, first of all, a review of the network. We commissioned what was called the holistic network design.
And those were the first times we actually looked ahead and started planning our infrastructure properly. We also changed the regulatory regime from one that was incredibly slow to approve projects to one, as I say, where we approved the bulk. projects in one go at one board meeting. So in my time at Ofgem, I think we corrected the problem and I don't think it's fair. I shouldn't comment too much on the water sector, but I do think we are in a different position as a result. And although there are delivery challenges here, as I said up front, the investment has been unlocked for these projects and it's been unlocked to allow the network companies to move forward.
Tim, I may have stolen all of your .
And those were the first times we actually looked ahead and started planning our infrastructure properly. We also changed the regulatory regime from one that was incredibly slow to approve projects to one, as I say, where we approved the bulk. projects in one go at one board meeting. So in my time at Ofgem, I think we corrected the problem and I don't think it's fair. I shouldn't comment too much on the water sector, but I do think we are in a different position as a result. And although there are delivery challenges here, as I said up front, the investment has been unlocked for these projects and it's been unlocked to allow the network companies to move forward.
Tim, I may have stolen all of your .
11:09
Speaker 3
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Speaker 3
Sandwiches, but anything you want to add on Off Jim's role, I'd be happy to for you to add. Yeah. Look, I mean, I think I think what we what we would say on this is that, you know, we, we've argued for a while, I think for, for planning and that's that planning the system. And that's not an ideological position. It is simply based on the fact that building out networks takes a long time. And acquiring generation doesn't take anything like as long. So if you're going to match the two, you need to plan the system a bit.
And I think that during that period, as Jonathan said, if when we didn't have that look ahead, it is it is difficult to build out a network when you don't know what you're building it out for. And I think that what we what we have done is tried to is to adapt quickly when those signals have become clear. So if I look back at the. 22 period, the government at the time increased its targets for offshore wind and then procured more during during the auctions. And we immediately moved to this process to try and get these.
projects going, to get those. approvals going more quickly. But I think the move to a more centrally planned system that is that has already been started, but is to .
And I think that during that period, as Jonathan said, if when we didn't have that look ahead, it is it is difficult to build out a network when you don't know what you're building it out for. And I think that what we what we have done is tried to is to adapt quickly when those signals have become clear. So if I look back at the. 22 period, the government at the time increased its targets for offshore wind and then procured more during during the auctions. And we immediately moved to this process to try and get these.
projects going, to get those. approvals going more quickly. But I think the move to a more centrally planned system that is that has already been started, but is to .
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Speaker 3
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Speaker 3
That's that's not a short term. Sure. I think I think what what I'm talking about here is about the, the, the, the moving of the. generation to where, where, where the demand is. You need to have a planned system to know where that generation is going to take place, where it's been recorded, and where you need to need a network out to build for it. So I think look, clearly, as Jonathan said, we are learning lessons from that period and we're making sure that we are pushing the investment and the .
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11:11
Anna Dixon
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Anna Dixon
Okay. So we recommended the set up of Nisso as well. Okay. Yeah, maybe too little too late. And it does worry me that that long term planning wasn't going on within the department, regardless of what the politicians frankly, were, you know. deciding in terms of, you know, these are beyond political cycles. This is about our energy. security and, you know, the issues around energy. diversification have been known for a long time. So anyway, I won't go there. But I despite the fact that you're saying about strategic planning it again, nice that, you know, you started thinking about that, but we're not going to get an actual strategic spatial energy plan, as I understand it to be published.
Whereas the date centralized strategic network plan in 2028. So that's going to be far too late for anything to do with the Clean Energy. 2030 target, isn't it? And I just wonder why it's taken so long to get to a point where this strategic .
Whereas the date centralized strategic network plan in 2028. So that's going to be far too late for anything to do with the Clean Energy. 2030 target, isn't it? And I just wonder why it's taken so long to get to a point where this strategic .
11:12
Speaker 1
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Speaker 1
Planning is resulting in an actual strategic plan being put together? Well, it's worth talking about the the versions of that plan we've already issued. I mean, this is looking at the very long term. So it will be setting out a network plan based on the government's view of what we think we're trying to achieve. But this isn't the first time we have .
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Speaker 6
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Speaker 6
We did the first sort of holistic network design, which was looked at, how do you. integrate all of the offshore wind? And that was in response to sort of the increase in the targets that that. government had made at that time that that Jonathan talked about. And we have built on that. Then through after the pathway to 2030 report again, which was holistically looking at it, and then on the strategic spatial energy plan, just to say. So we have been working on that now for just over 18 months. We have developed a set of. pathway options out to.
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11:13
Speaker 6
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Speaker 6
To set that up through through next year once we have the pathway decided. And the second thing we'll do is that we will back check and feed in and make sure that all of the programmes and projects that are underway are consistent with that pathway as selected by the Secretary, the Central Strategic Network plan that you refer to will be us taking the outcome of that Seep programme and doing a full recast of the network plan, and that will .
11:14
11:14
Anna Dixon
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Anna Dixon
Then that will will go, will go through. So we're okay. So that strategic plan is much more long term to 2050. So it's so coming back to the sort of. 2030 and the sort of failure to have a. strategic planning approach over the. last decade or so. As a result of that, how much more do you think consumers have paid as a result of sort of delays, like the .
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11:14
Anna Dixon
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Anna Dixon
Estimate how much customers would have saved had that infrastructure been put in place. Okay. And maybe this is back to Fenton then , in the absence of a strategic plan at the moment, how are we continuing to. ensure that that we're not. expanding the, you know, the generation projects. faster than grid.
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11:15
Speaker 1
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Speaker 1
Strategic planning of our energy system in a much more structured way, I suppose. I suppose that's our point, is that the Ssrp is a product, but it's part of a process to change the way we approach the grids and look through the Clean Power Action Plan as well. We have made sure that we integrate that with generation planning, with the planning of storage and other things. So we're on a journey. We're not saying we're fully there yet, but it is not the case that we .
11:16
Anna Dixon
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Anna Dixon
Haven't learned this lesson. This lesson has been learnt and is being implemented already. Okay, I might just turn to Ofgem, to Tim. So as an example, on the edge of my constituency, we have. proposals that are, you know, they're for an extremely large wind farm up on what's locally known as Haworth Moor.
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11:16
Anna Dixon
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Anna Dixon
You know, it's obviously on sensitive like those. It's on peat. So peat bogs, upland peat bogs. So there's a separate issue about environmental impact of these projects. But coming to the point about where are these new projects being located? When are they being. commissioned and whether there's confidence that if they are commissioned, they can actually. contribute to the grid because those grid connections are there. Obviously, you know, you're busy with these various.
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Anna Dixon
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Anna Dixon
You know, lobby me about in terms of the climate emergency. So I do want to see these, and I'm very pleased the government is, you know, putting these auctions are happening. But obviously, there's no point doing these auctions and putting all this money out for new generation if we can't be confident that the locations that they're happening are going to have the grid capacity. So how are you? Right here, right now with these.
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Speaker 3
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Speaker 3
Generation is being. commissioned and where the grid capacity is going to come on. Yeah. And the the grid build out ideally needs to get ahead of the generation. And that's the challenge. But the projects that we've got in the, the projects, they those are the ones that are responding to that, that generation that's going .
11:18
Sarah Hall
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Sarah Hall
To come on stream to make sure that we can build out the grid to meet it and maybe talk a little bit about the incentives that we put around that to really get the network companies working to deliver. So under the Asti regime, for example, we've we've added our most quite a radical step change in how we're. incentivizing the transmission companies are on the hook for substantial penalties. If they deliver those projects late, they can get rewards if they're delivered early as well. So we're trying to get them to think innovatively, to bring them forward.
And then on.
And then on.
11:18
11:18
Sarah Hall
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Sarah Hall
We we are rightly as as the committee has talked about, also concerns about the pace of connections, the offer dates, people are getting. So we're consulting at the moment about ratcheting up the incentives on network companies to deliver connections. faster and to have potentially paying damages to consumers if they're delivering them later than the offers they.
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11:19
Anna Dixon
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Anna Dixon
Well, because there's no point incentivizing around a soft date. So. So who are they making? Sorry, just because that was quite technical. Who who's making the offers to whom? It just goes to this point of like, there's many players here and I worry about a sort of, you know, coordination. If we look back, we've seen the consequence of that and it falls to consumers to pay the. consequences because we're having to turn on expensive gas. So in trying to mitigate and coordinate between the new generation projects that you're. commissioning through the allocation rounds, if I've understood.
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11:19
Anna Dixon
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Anna Dixon
Getting those. connectors and the grid capacity to take that into the grid so that we can benefit from the clean energy, I'm still not really confident that the. timing of those is working, that the grid and the connector is ready so that when those wind farms are built or the solar farms are there, that we .
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Speaker 1
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Speaker 1
I'm happy to give me this assurance. So come in. So there's there's a number of different different aspects to this. So if you take the, the wind farm you're describing, first of all, you have to make sure the networks built. Now that's done through the transmission level, through the regulatory process as we've talked about. But Ofgem also have their own local network processes to make sure the local network can cope with it. When you are a project, you then go to that local network, and part of your due. diligence should be to look at the grid and see where you think there's capacity, and then.
ultimately through the SOE and through the distribution companies, you get a connection offer that gives you a date. Now there's two. There's two parts to that. So that's part one. And what we've been doing is clearing out that queue to make sure that that connection date can manage the aspirations generators have. Part two, which B is. describing is when you get that date, we need to make sure the network companies meet it. So one of the things Ofgem is looking at is how do you ratchet up the. incentives to make sure the distribution companies, so the local.
networks play their part in making sure people get connected on time. So there's a number of different aspects, but it really is about, number one, getting the grid built. Number two, making sure you put the right incentives for the. companies so that they improve their .
ultimately through the SOE and through the distribution companies, you get a connection offer that gives you a date. Now there's two. There's two parts to that. So that's part one. And what we've been doing is clearing out that queue to make sure that that connection date can manage the aspirations generators have. Part two, which B is. describing is when you get that date, we need to make sure the network companies meet it. So one of the things Ofgem is looking at is how do you ratchet up the. incentives to make sure the distribution companies, so the local.
networks play their part in making sure people get connected on time. So there's a number of different aspects, but it really is about, number one, getting the grid built. Number two, making sure you put the right incentives for the. companies so that they improve their .
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Anna Dixon
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Anna Dixon
Connection offer, but that's dependent on on Nyiso and the transmission companies. I still feel confused about the many different players in this and the confidence that we could have that the investments that are being made in made in. generation are going to line up in the way they haven't in the past, and that we're not going to be in a position where these constraint .
11:21
Speaker 1
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Speaker 1
Costs, if anything, go up rather than down, which is obviously what we want. So the major change we think we've made is to introduce that strategic planning and put the investment in place. We accept there is a big program here, and we need to manage the risk of that program to get it implemented on time. The other aspects, and this is for the regulator, is to make sure the companies are incentivised to do their job. And when you're talking about wind farms of the sort I think you're.
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11:22
Clive Betts
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Clive Betts
Yeah, I think I'm done. Okay. Just coming back to the to the confusion, I think we we all are confused to a degree about where. responsibility lies. If we come back to the key point, we started off here. So when we have this grand plan that you're going to produce, will it make it clear where. responsibility for each element is? What the. potential for fail, for failure to happen? And who is responsible for that? If it happens, will that be laid out very simply .
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Chris Kane
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Chris Kane
The oversight? Yes. Of course. Chris. Yes. To pick up on that, I think the two was asking for something simple, but I think I heard you say that it's going to be spread over multiple documents. I think just just to be clear, I think what we were looking for is something simple that we can see in one place,
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11:23
Rupert Lowe
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Rupert Lowe
Specifically how that's really helpful. Thank you, Chris, for that. That's Rupert back to me. Clive. Thank you very much. Chairman. Right. So having listened this morning, I think the key. question for all of you is, what are you going to do to improve your oversight of grid upgrade upgrades as a whole? I mean, what are you all going to do to. improve and ensure that you do deliver what you say you're going to deliver, which I'm not immediately, as Anna says, it's very confusing for members of Parliament. It's our job to try and make sure this doesn't go wrong for the public.
11:24
Speaker 1
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Speaker 1
What are you going to do? That's my question. Understood. And this is something we take incredibly seriously because at the end of the day, the department is driving a major infrastructure upgrade. And so it's worth saying what we've done. So through the Clean Power unit, I think is delivery. Monitoring of both generation and networks is in a very different place already. But I think we accept, and perhaps Emily can come in and explain how we are going to reinforce that. So we've already got data coming into the department in a way that I don't think was around, say, five years ago.
The job now is to expand that and to make sure we have full oversight, not just of the.
The job now is to expand that and to make sure we have full oversight, not just of the.
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11:24
Rachel Gilmour
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Rachel Gilmour
Challenges for generation projects as well, and we need to coordinate that. But Emily, perhaps you'd expand. Yeah, this is this is one of the recommendations from the Nao report. That's been very helpful because as Jonathan said, we've been on a journey here. Historically, the department has never tracked delivery of individual network projects. Over the past years, we have been doing that as part of the networks programme, getting quarterly data in from the toes. The Nao report, I think, acknowledged that we'd made progress, but also pointed to areas where we can go further. And so we're looking at how we build up the skills in the.
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11:25
Rupert Lowe
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Rupert Lowe
Portfolio, as well as the grid portfolio and how the two link up. Okay, so, so looking at all your CVS, with the exception of Fenton, I don't see most of you have any engineering skills. You don't have engineering knowledge. I mean, a degree in history or greats isn't going to necessarily qualify you to oversee this. So. So do you think you .
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Rupert Lowe
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Rupert Lowe
The people actually who are responsible for delivering it managed to slip the noose by having a consultant who they've paid a fee to. So do you think you need in senior positions to have more engineering skills? That's question one. Jonathan, you mentioned earlier in your reply that you are keen to get greater prioritisation. I think I think you said right. So do you think you're going to get that greater prioritisation.
Do you do you think you're going to get that from from from basically from the Secretary of State? Does the Secretary of State know .
Do you do you think you're going to get that from from from basically from the Secretary of State? Does the Secretary of State know .
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11:26
Speaker 1
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Speaker 1
Want to. prioritize and agree with what you want to prioritise. So perhaps picking up the the second question first, I think if you look actually at the the 2030 action plan, that was all about a first set of priorities for generation. So that really did for the first time, I think, set direction for the industry. And I think, you know, that has driven a huge amount of change and investment. So yes, I think we will get that prioritization. I'm not going to pretend it's all easy and I'm not going to pretend it's all national either.
There are local and regional trade offs that need to be made, as you said, between housing, other public infrastructure and indeed local investment. So we need to work with mayors and strategic authorities as well to do that. On the first look, I think if you look at the picture for the department, I'm six months in. I think we are going to need to strengthen our delivery capability overall. So I've already come in front of this committee on Sizewell and other major projects. DNS is moving to become an infrastructure delivery department. That's going to mean reinforcing our engineering skills, reinforcing our major projects and programme skills to make sure .
There are local and regional trade offs that need to be made, as you said, between housing, other public infrastructure and indeed local investment. So we need to work with mayors and strategic authorities as well to do that. On the first look, I think if you look at the picture for the department, I'm six months in. I think we are going to need to strengthen our delivery capability overall. So I've already come in front of this committee on Sizewell and other major projects. DNS is moving to become an infrastructure delivery department. That's going to mean reinforcing our engineering skills, reinforcing our major projects and programme skills to make sure .
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Rupert Lowe
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Rupert Lowe
On, on the specific. But all of this is the coordination job we need to manage. Okay. And I have a question which I please indulge me. I have this sort of question for you. Do you think if you'd gone down a modular nuclear route rather than a solar and a wind route, do you think you'd have managed to, number one, deliver the projects more easily with a view to planning? And number two, do you .
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11:28
Speaker 1
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Speaker 1
Modular nuclear. And we are working hard with Rolls-Royce. Question is, would it have been easier? So I'm happy to. I will come on to that, I promise. But it's worth saying what we are doing. So we're working with Rolls-Royce on the first SMR. We have an advanced nuclear framework to get other advanced nuclear projects into the country, and indeed, just to complete it, we are also working to develop fusion, which has a lot more momentum, frankly, than I've ever seen it have in its history. I think, though, with any technology, there are pros and cons and there are risks.
So Disney's approach has always been to have a diversified.
So Disney's approach has always been to have a diversified.
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Speaker 6
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Speaker 6
Within the generation fleet, and. nuclear remains a core part of all of our plans going forward. Both large scale nuclear and small modular reactors are a central part of of all of those plans going forward as to whether we could have moved or should have moved quicker to them and said they're not deployed at scale anywhere yet. Small modular reactors. So I think, as I say, having that. diversity of portfolio is important for.
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11:30
Rupert Lowe
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Rupert Lowe
And for ensuring that we make that transition in a managed way. Well, Fintan, we can debate the benefits of diversity as long as we want. But I think in your. diversified energy portfolio, I think you'd agree with me that there is now less certainty of. generation from wind and from solar than there is ultimately from either gas or coal powered fire stations. So the whole. problem that we face is a huge number of .
11:30
Speaker 6
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Speaker 6
Connections and much more uncertainty than we used to face. So I think one of the things that we take very seriously is making sure that as you. diversify that portfolio, you can manage it and keep the lights on, no matter what the set of weather conditions or anything else that's going on in the world. So while and if you look at the Clean power advice, for example, it's a really good example of this. While gas usage and in the overall portfolio goes down from what it is today, close to 30%, probably down to. 5% in energy terms, the.
11:31
11:31
Speaker 6
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Speaker 6
The gigawatt capacity that's there is still broadly the same as it is today. And that's because we. recognise that there are times that the sun doesn't shine, the wind doesn't blow, and we need to make sure that we keep the lights on through that. And, you know, storage is really helpful in that regard.
11:31
Rupert Lowe
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Rupert Lowe
New nuclear is really helpful in that regard, as is is the gas. You're going to find it hard to convince me that you haven't got more free radicals in your gamble bag now than you used to have. So I'm not sure I'm happy with that. But finally, as a matter of interest, and I think this one's for you, Emily, as the senior. responsible owner of the Electricity Networks programme, how much of this.
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Rachel Gilmour
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Rachel Gilmour
And they have to be accountable and responsible for that delivery. And there's so much that sits within their so sole control, which we couldn't, which we couldn't and shouldn't be taking off them. Ofgem then has their role to regulate that and to apply the regulatory regime. appropriately in how well they've delivered.
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11:32
Speaker 3
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Speaker 3
Holding the companies to account for it. Well, to be fair, I think that's very much Ofgem's role is to hold those transmission companies to account for that, for that spend. That's the envelope that we set through our price control based on their business plans and the need. And what we do is monitor that .
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11:33
Clive Betts
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Clive Betts
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11:33
Sarah Hall
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Sarah Hall
Aren't incentivised to not do it, and they are, but you want to talk about some of the incentives and penalties. And you might also want to add on to sort of positions of what you're looking to do and enhance powers as well. But just first of all, what the powers we do have and we, we have very, very strong financial levers that we apply penalties, as I talked about in delivery, but also we have enforcement powers and things such as the hacker case recently, which was a substation that. wasn't delivered in the way that it should have been, where we actually find the transmission companies for performance on that.
So yes, we do have those powers. We use them,
So yes, we do have those powers. We use them,
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11:33
Sarah Hall
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Sarah Hall
Haven't worked? So if you mean by how they haven't worked, are we. confident that our current set of incentives are going to deliver everything we need in the Clean Power Plan? I think I think the Nao report is is very sensible on that and saying that we we that's always a balance, a trade off assessment. We think about how to balance the how we ratchet up delivery incentives. And we have committed, we're very in agreement with the recommendation that we have to keep monitoring how that's working. And we'll do that as we go through this regulatory period to see if that balance is working.
We're in a very substantial change environment to build out of .
We're in a very substantial change environment to build out of .
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11:34
Sarah Hall
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Sarah Hall
You may feel that you have to come and change those incentives or those penalties. We've changed them all readily. So Jonathan talked about the, the, the Asti program and how we. uplifted how much risk we were putting onto transmission owners when we then committed to this current. regulatory period, we increase that risk. Again, we removed numbers of excusing events from them. We said, no, it's now their job to hold all of the risk for managing their supply chain, for also managing the system access points that Emily mentioned there. So we're constantly ratcheting up how much risk we put onto them because we think .
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Speaker 3
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Speaker 3
Is that fair to consumers? I think it there's a balance here. I mean, I think what the report says, that what will benefit consumers ultimately here is delivering these projects because we know that if we don't if these projects aren't delivered, that that will have consequences for consumers and the bills they pay. And that's very much at the centre of everything that we do. Now, that is not to say that this is at any cost. I mean, we we scrutinise costs carefully, but what we what we are keen to do is to make sure that we get these projects underway.
We make sure that the incentives and the penalties are in the right place, so that the risks lies where it needs to lie and not with consumers. But yes, we have pivoted our approach because.
We make sure that the incentives and the penalties are in the right place, so that the risks lies where it needs to lie and not with consumers. But yes, we have pivoted our approach because.
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Clive Betts
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Clive Betts
Need and the resources we need to hold these companies to account. And that's what we're doing. I'm just coming back to fairness to consumers. If they don't feel they're getting enough, the. transmission companies will appeal, won't they? They'll say, you're not treating us fairly Ofgem. We're appealing. We want it looked at again and they could go to court on that legal process. They will always do it if they think they can get more money with a better settlement.
On the other hand, the poor consumer relies on. organisations like Citizens Advice.
On the other hand, the poor consumer relies on. organisations like Citizens Advice.
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Speaker 3
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Speaker 3
Yeah. That's an unfair balance in the system, isn't it? So, look, I think we we our primary duty is to consumers. That's what drives everything that we do. And we make the judgments we make. And these price controls in what we think is the interests of consumers. I think the point that Citizens Advice are making, and I am sympathetic to this, that the way the appeals mechanism works means that it is it is difficult for somebody to perhaps to come in on the other side. And I think there are things that they are asking for that that that that department will ultimately need to take a view on about how this appeals process works and how we can perhaps get those different voices in the room.
I mean, I would say that, you know, as Ofgem, we are there to represent consumers, and that's what we always put at the heart of our decisions. But I do understand citizens advice is .
I mean, I would say that, you know, as Ofgem, we are there to represent consumers, and that's what we always put at the heart of our decisions. But I do understand citizens advice is .
11:39
Speaker 1
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Speaker 1
And the Secretary might be over to you. Yeah. And look, I think we understand Citizens Advice positions. I should point out that it's not just the consumer group. Suppliers historically have appealed price controls on behalf of customers. But I think we'd always be keen to look at any proposals that strengthen that. Accepting Ofgem have a balanced job to do. I mean, I mean also, again, maybe sort of stretching into my old role, but we also look at ways of putting checks and balances into the price control process. Or we did as Ofgem to make sure that we had those checks and balances in place, including consumer .
11:40
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11:40
Chris Kane
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Chris Kane
Right? Yes. Chris. Just just to say the consumer part of this, a devolved element, the consumer consumer Scotland, for example, exists to help consumers. Can you talk a little bit about how you work across the elements of this, which are devolved, and it will be the consumer aspect of that, how you how you engaging .
11:40
Speaker 3
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Speaker 3
With the mechanisms of devolved parliaments in this area? Yes. So we work, we work and talk regularly to the devolved administrations and those bodies that represent things that are dissolved. So things like fuel poverty in Scotland obviously is devolved. We talk to Consumer Scotland on a regular basis and they are part of our consultation. So we work with them and ensure that that .
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Speaker 3
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Speaker 3
Kingdom where we have to be with the way that we talk and interact with each other. So, look, we have very close links with bodies in Scotland. We've got an office in a big office in Glasgow. We have a large number of staff based there, and we put just as much energy into working with, with, with those bodies as .
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11:41
Anna Dixon
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Anna Dixon
Want to follow up maybe and then on to GB grid, if that's okay. Yes. Thank you chair. So just a quick follow up on consumers. As you have seen, we received evidence from Citizens Advice. And, you know, among the things that I think they would make a difference to their ability to strongly challenge on behalf of. consumers would be that they wouldn't face the.
liability for paying the.
liability for paying the.
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Anna Dixon
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Anna Dixon
The sort of legal fees should it, the decision not find in their favour. So I do hope obviously I realise that's a policy matter, but I do hope that you will take that away and draw it to the attention of ministers , and look at whether there could be. consideration of waiving their appeal fees. But obviously the other thing that they put a great emphasis on, which we touched on earlier in the hearing, was about transparency.
And, you know, as as the chair suggested, you're making quicker.
And, you know, as as the chair suggested, you're making quicker.
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Anna Dixon
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Anna Dixon
Obviously, with. Pre-approvals in in. And that means that perhaps less detailed scrutiny in advance. But that, I think, then puts an even. greater emphasis needed on these project level costings. And again, I don't want to overplay the water sector analogy, but what's you know, one of the things that's been clear through their investment cycle is, you know, you set a large envelope at the high level, but there's there's really very little scrutiny of actual. delivery value for money at the project level. So is this what was covered be in what you said about this report coming in February?
Is that is that where consumer. organisations like Citizens and Advice and Consumer Scotland, is that where they're going to get the chance to really see .
Is that is that where consumer. organisations like Citizens and Advice and Consumer Scotland, is that where they're going to get the chance to really see .
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Sarah Hall
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Sarah Hall
And be able to challenge better that sort of cost? Absolutely. That's where we'll set it out at the at the whole system level, but also on individual projects showing what we think they're costing. But also this is this is what any report is very clear about, that there is a lot of information out there, but it's not very usable, not very easy to read. So we publish our project assessment. So when we set each budget for individual projects, when they get to.
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Sarah Hall
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Sarah Hall
We've done that for six of the big projects so far. And just to give you a scale of the scrutiny that we are putting them under, we have disallowed over. £600 million of the cost that was asked for for those projects, so I wouldn't I don't quite agree with the. characterization that we've put off the scrutiny on costs. I do think we've ratcheted up scrutiny on delivery as well. And we do have a much .
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Anna Dixon
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Anna Dixon
Yes. We're expecting there to be a degree of bill impact assessment in there. Okay. So I think those were the main points that we received in evidence from the consumer side of things. Obviously, there's been an announcement since the NIO did their work around this. idea of a GB grid. So obviously we've got these private companies, the three with geographical.
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Speaker 1
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Speaker 1
Delivery of the upgrades to the grid that we've obviously been discussing in this session? Yeah. And look, I think Secretary of State and PM have been clear they'd like to see greater public control of our energy system as a whole. There's kind of two facets to this one. That's something that I think all three organisations have been working on for some time, which is, you know, how do you get more diversity of providers in there? So you're not relying, for example, for transmission on three providers. So we've had a regime that will allow us to do that.
That's been through.
That's been through.
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Anna Dixon
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Anna Dixon
In both of those, and that's where GB grid will start and then we'll shape it from there. Yeah, I mean obviously quite a number of. industry players also put in evidence. And you know what comes through, whether it's energy UK, solar energy, UK, Octopus energy, all of these is, is getting the right assets built in the right places at the right times. And, you know, it seems that the TSOs haven't had a great track record. So, you know, bringing in GB grid. But given that this is obviously a recent announcement, do you have any sense when it could at least start to have some.
impact on the .
impact on the .
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Speaker 1
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Speaker 1
That will face any player. Well, the only the only thing I'd point out is I think on planning and system access, those are both external processes or technical sort of things we've got to work through as part of this implementation. But GB grid is part of Great British Energy, and Great British Energy does have a fund focused on the supply chain. And that comes down to two things. It's the the point you made rightly, about getting the right skilled jobs out of this, but it's also about making sure if we are building this here, can we be .
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Anna Dixon
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Anna Dixon
Underneath that building industry? We can start selling things to other countries at the same time. Yeah. And I think when we've looked at other. projects in nuclear decommissioning and others, it's about having a. coordination of of. suppliers and ways of contracting with them in long term alliance partnerships. Again, is that something that you're pushing in terms of your major projects approach to learn lessons from the many failed infrastructure projects that this.
committee and our .
committee and our .
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Clive Betts
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Clive Betts
Want to add anything on GB grid? I think that's probably one question. Does it does it. complicate the attempts to. coordinate because it brings an element of competition doesn't it, into the issues. And currently the transmission companies are. monopolies so they can collectively work together or be asked to because it doesn't actually .
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11:49
Speaker 1
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Speaker 1
So does GB grid component compromise that in any way? I don't think it does, because once again, once a project is allocated, you then pursue that project. So we would still expect the arrangements around the supply chain across the industry to be maintained. And on the on the sort of last part of the grid connection, I think we do need to diversify that because that will give us volume. And again, I don't think that will complicate the sort of .
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11:49
Chris Kane
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Chris Kane
It will help. Chris, do you want to follow up? Yeah, but it's going back a couple of questions. Is that okay? Okay. That's fine. Just just listening to you when you were when you were asking questions about how the regulatory powers are used. And I'm reminded of an HMRC hearing we had where they had a power and they'd had it for years that they hadn't used it. Do you have any. I think this is possibly a question. Do you have any regulatory powers for which the threshold for deploying them has been met, that you've not done so, and a way of ensuring that we understand why the powers wouldn't be deployed?
You know, the threat .
You know, the threat .
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Speaker 3
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Speaker 3
The power is not the same as deploying the power. So I think there's, there's two types of powers here, which I would I would distinguish. So there's, there's the. incentives and penalties that you put in the price control system that that really try and drive the. behaviours of the transmission companies and get them to do what we need them to do, which is deliver on time and to budget so we can create a regulatory. environment that that does that by making sure that there is sufficiently. incentivised and they're sufficiently penalised if they don't do what they need to do.
The the other powers, we either have the sort of ex post the after the event powers that we have are around.
The the other powers, we either have the sort of ex post the after the event powers that we have are around.
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Chris Kane
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Chris Kane
Scenario where that would play out and I'm struggling to think of examples. But I mean, if if you if I think back to the HMRC hearing, it was about putting companies into special measures that just aren't doing things properly. So, so, you know, oversimplifying it is a way of giving me saying, we don't like what's happening. We're going to take control. We're going to do it. Ultimately, if you've got a company that's not going to deliver on something or not do what they need to do, by the time you need to do it, do you have a power to say, right, we're now going to preempt that.
This isn't going to work. We are not going to get the the infrastructure by 2030. We are now going to have to step in ahead of the problem happening to make sure this gets back on track rather than the what I'm hearing across this hearing, which is, no, we're doing all we can to stop a happening, but if it does, we'll then jump in and do something. Do you have the ability to say right now? We think with all of our years of experience by this date, this thing is just not going to get delivered.
We're going to have to step .
This isn't going to work. We are not going to get the the infrastructure by 2030. We are now going to have to step in ahead of the problem happening to make sure this gets back on track rather than the what I'm hearing across this hearing, which is, no, we're doing all we can to stop a happening, but if it does, we'll then jump in and do something. Do you have the ability to say right now? We think with all of our years of experience by this date, this thing is just not going to get delivered.
We're going to have to step .
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Speaker 3
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Speaker 3
It's four times as much as much investment as has been done before. These are big. companies running these. What we do do is scrutinize them very carefully, and we hold them to account on individual. projects and the work that B is doing. And the what our team do is monitor those projects from the beginning. So I think we have powers to make sure that those projects are being delivered and that where companies .
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Speaker 3
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Speaker 3
See the car crash happening, you simply have to wait for it to happen. And then you step in and clean up the mess. I wouldn't say that was the case. Now I think I think we we are involved in projects from the beginning in terms of our scrutiny of them , so that we and we monitor them very carefully. So I think .
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Sarah Hall
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Sarah Hall
Are we have that. visibility through the scrutiny work that we do. This was a phrase of sort of seeing the car crash happening. Sounds quite passive. What we do with the teams together is we work very closely with the network companies to get them to talk us through their plans, tell us how they're mitigating the risks. And but we constantly through through Emily's governance structures as well put put pressure on them to to improve those mitigations.
So we think they, they .
So we think they, they .
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Chris Kane
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Chris Kane
And the difficulties of understanding that if a problem does happen, do you have an internal measure for working out where the failure was? In what part of the oversight process was the failure? Where did it occur? Otherwise, you could have five different organisations blaming each other and never getting to the root of it. So if a if a failure does occur and there are multiple oversight partners. involved in this, do you have a .
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Chris Kane
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Chris Kane
And to, to tackle some of the dilemmas. You're you're sort of raising it again just because for time, if this was the if this was doctors and the NHS, they'd have a no blame approach to figuring out what went wrong to understand it. Whereas in civil in government and civil servant and Parliament, sometimes it's the silo approach to saying, well, we don't want to take responsibility. I'm just trying to make sure that you've got an almost a no blame aspect to saying,
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Clive Betts
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Clive Betts
Problems, we look at them and we make sure we learn lessons. Thank you. Okay. Well, come over to Anna for the last question. There's one point on if you've got a company that really isn't delivering and all your incentives and sticks and carrots aren't working, could the project be transferred over to National Grid at that point? Do you have the power to do that? Say .
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Speaker 1
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Speaker 1
My terminology right. So many different organizations. Yes, yes. Okay. On that, I think we're starting looking at. competition and and connections. But there will be a process with great British Grid does. I don't want to underplay, though, the complexity of trying to transfer a major infrastructure project between different entities. You know, there's, there are all sorts of risks around doing that. So, you know, we are very happy to look at that.
But at the moment, the scope .
But at the moment, the scope .
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Anna Dixon
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Anna Dixon
Yeah. I suppose I was looking again at figure eight, which is the chart in the middle of the Nao report that shows total spend since. 2010 with the. projections up to 2030. I suppose the two things that obviously are very, very clear is a massive. underinvestment in any upgrades to the system over that 15 year period, but also just a huge uplift, as you say some, I think four times that level of investment that's due is going in and is due to go in up to.
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Speaker 3
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Speaker 3
So I'm guessing this is a question for Ofgem for either Tim or be. Yeah. And look, I think that that is that is exactly the challenge. We're at the beginning of some of these big projects. We're beginning of our next price control period. But we need to hold the transmission companies to account to make sure that they are spending against their plans and delivering what they what they have committed to deliver.
If they can deliver it cheaper, great. But we if we if we see underspends, we want them to be through.
If they can deliver it cheaper, great. But we if we if we see underspends, we want them to be through.
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Sarah Hall
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Sarah Hall
Deliver are you going to tolerate in terms of underspend in this period? So the thing that we're focused on is the outcome from the regulatory period. What we know, what's really important to consumers is that we get those constraint costs down, those big costs that are going to hit the system if we don't get this, this work built. So we we're interested in are they delivering the. outcomes as well as are they spending the money to do that efficiently? So for us, it's less about how much are we tolerating? What underspend would we tolerate? As Tim said, what are they delivered for that amount of money?
That's the scrutiny it will be. We're really focusing on here. And look, we're not we're not pleased with some of the historic track rate here. We've you know, we've seen in in the in the last regulatory period, the one that's just closed, some. underperformance of build out of the network. We've we've seen some some incentive penalties that National Grid, for example, have had to pay. We're just closing out that period now.
And we'll see what the final position lands on, on that. But we'll keep applying those penalties so that they feel that wherever .
That's the scrutiny it will be. We're really focusing on here. And look, we're not we're not pleased with some of the historic track rate here. We've you know, we've seen in in the in the last regulatory period, the one that's just closed, some. underperformance of build out of the network. We've we've seen some some incentive penalties that National Grid, for example, have had to pay. We're just closing out that period now.
And we'll see what the final position lands on, on that. But we'll keep applying those penalties so that they feel that wherever .
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Anna Dixon
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Anna Dixon
They fail to fully implement what we've asked them to do, they're held to account for that. Yeah. But at the end of the day, they're a private monopoly. So like your. incentives to like say, well, you've failed, we'll go elsewhere, have until now been limited. And until we get GB grid, there is no alternative. So I'm assuming that for this period to.
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Anna Dixon
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Anna Dixon
You know, you expect to be to, to not be delivered? I mean, like you've got this risk rating on all these projects. Some of them are clearly not going to deliver on time. So I suppose I was trying to understand from Ofgem's point of view, like, do you have some tolerance of what. underperformance you are almost.
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Sarah Hall
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Sarah Hall
Record of the transmission owners and the many constraints they face. So we're only six months into this regulatory period. And so we don't we don't we haven't conceded any sort of slowdown or acceptance of any tolerance. And we are very much committing through this report as well to increase the transparency on what's going on. We already produce annual reports on how it's going, the price control level, but we're going to disaggregate that to make sure people understand what that's delivering for the consumers as well.
So we'll, we'll keep .
So we'll, we'll keep .
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Anna Dixon
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Anna Dixon
To account for what we've set out and expect them to deliver through this price control period. Yeah. I mean. 70 billion of investment on consumer bills. I think consumers do want to know that that's not only, you know, delivering cleaner energy, but it will ultimately deliver lower bills. So I think it's really critical that that information is very .
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Sarah Hall
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Sarah Hall
This is very important. If you don't maintain things, they go wrong. The maintenance is something that we I've got a very strong focus on as well. And you were asking earlier about do we have enough engineering resource in our different teams? One thing that we've done in Ofgem is actually expand our asset maintenance engineering team to make sure that we can actually do more, more invasive , practical.
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Clive Betts
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Clive Betts
Well, let's, let's right back and give you the detail. But until Anna raised it right. Okay. I think that brings us to the end of our session for today. And thank the witnesses very much for coming. I think we've had a very good session looking at the importance of upgrading the grid, importance to keep the lights on and to keep the lights on at reasonable cost as well. So we will produce then an uncorrected transcript of the hearing, and that will be published on our website in the coming days. And I think we'll then produce a report.
Having looked at all the
Having looked at all the
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