The UK’s “Weak” National Grid is Crippling Scottish Business

The UK’s privatised national energy grid is “weak” and nowhere near where it should be to support the transition to green energy. For some privileged people like Prime Minister Rishi Sunak, the lack of capacity can be overcome – he paid tens of thousands to upgrade the grid near his home to heat his personal swimming pool. 

It is a different story for Scottish businesses and domestic consumers. They are left paying the highest bills in the world– which show little sign of coming down. They are very far from being able to experience the benefits of living in a country rich in energy potential. 

The situation is a “national scandal”, argued an industry professional in the Scottish Farmer recently. Farms across Scotland are being denied permission to build renewable energy facilities to reduce their crippling costs – even if they agree not to export cheap power back to the grid!

“A large commercial system for an agricultural supply business was advised that it could not be connected until 2032. This organisation’s electricity bill has quadrupled since last year and the proposed system would immediately reduce their reliance on the grid by 45%”, James Storry, manager of construction firm Emtec wrote.

Two other farms have been refused permission to create the renewable supply they wanted – even though they were happy to use all the power themselves and not to push any back to the grid. A concerned Storry believes: “Urgent action is required, but I am afraid we will not get it unless grid capacity is recognised as the national scandal that it is.”

Many large-scale Scottish developers are being told it will be decades before they can connect new projects, if at all. If they do get permission, they are charged ten times what English suppliers have to pay to connect to the grid.

A staggering £9 billion for shareholders

Instead of investing in vital infrastructure, the largest private company involved, National Grid, has poured money into shareholder dividends and share buybacks – a staggering £9 billion in the last five years. 

If Scotland were independent it could develop, control and regulate its own publicly-owned grid, with public interest, not profit, at its core. This would help make green, affordable energy available to Scottish businesses and consumers. Scotland could export green energy to England and to Europe, providing a further financial benefit. 

The National Grid is the main barrier to a transition away from carbon

Marlon Dey, head of research for the UK and Ireland at Aurora Energy Research told the FT last week that the UK’s national grid is the main barrier to transition to net zero. “There is only one solution and that is to physically reinforce and build more grid,” Dey says. “And if you can’t do that quickly enough, then you can’t build the renewable power we need and can’t get away from fossil fuels fast enough. And then you can’t decarbonise fast enough.”

The grid is “weak” – especially in energy rich areas like the Highlands and Islands  

Professor David Ingram warned in evidence he submitted to the House of Commons that huge investment would be needed in grid infrastructure if the UK was serious about moving away from carbon. But that has not happened: “The grid is weak – it has a limited capacity – in many of the peripheral areas where there are significant renewable resources. This is especially true of Scottish islands”.

For example, Orkney’s powerful wind turbines constantly have to be turned off when they could be operating at maximum capacity and creating very cheap power. 

Ingram explained: “The existing transmission grid was designed to take power from coal fields and export it to London and Birmingham”. It is still pretty much in that configuration today.

National Grid has for many years stuck with an outdated view that energy should be created near population centres – although thanks to new technology very little energy should be lost in moving power from one area to another. 

National Grid has used this outdated view to justify failing to invest in Scotland’s grid and charging ten times more for Scottish suppliers to connect. The Scottish Government has been demanding a level playing field for Scottish renewable providers for many years but that has fallen on deaf ears. 

Other countries have prioritised grid development in zones  with high green energy potential. But the UK did not choose to do that. 

So, for example, after the ScotWind auction for the right to build offshore wind in Scottish waters, potential developers were disappointed to hear that only a fraction of the suggested projects will be connected within the next 10 to 15 years.

Who owns the national grid?

Apart from Portugal which was forced to do it in a financial crisis, the UK is the only European country to have privatised its energy grid – a natural monopoly in the sense that there can’t be competition to benefit consumers. The ownership structure is increasingly complex and murky. 

Since privatisation in 1990, National Grid Transco PLC owns and manages the grid infrastructure in England and Wales (although it no longer owns the gas transmission system). 

It also manages the electricity transmission system in Scotland – although the ownership lies with two other private companies Scottish Power and SSE, a situation which appears to make investment in the Scottish grid less profitable for National Grid.   

SSE no longer exists as a Scottish business – it was acquired by OVO. OVO Energy is part of OVO Group, which in turn is a subsidiary of Imagination Industries Ltd, a holding company wholly owned by Stephen Fitzpatrick, a Northern Ireland born billionaire who lives in the Cotswolds. 

Parts of the national grid have recently been sold on to other private firms. Brett Christophers, a professor in the Institute for Housing and Urban Research at Uppsala University, wrote recently in a guest column in the FT: 

“Amid all the recent turmoil in energy markets, a significant transaction went largely under the radar: the January 2023 acquisition of a controlling share of National Grid’s UK gas transmission and metering business by Macquarie Infrastructure and Real Assets, in a consortium with the British Columbia Investment Management Corporation. Macquarie has developed something of a reputation for short-termism…Nor is Macquarie alone in this. Most asset-manager investment in infrastructure occurs through closed-end funds with fixed lifespans (normally of 10-12 years), which necessitate asset disposal before the end of the fund’s life…Why invest for a future you will not see or profit from?”

Gas transmission in Scotland may now be owned by Macquarie but it is managed by the Scottish Gas Network –  now largely owned by a US private firm and an Ontario pension fund, after SSE sold it off in 2021. Global share owners are now profiting from moving gas across the network and selling it back to Scotland – so the bills paid by hard-pressed Scottish families, businesses and farmers are helping to ensure a comfortable retirement for middle class Canadians and so on.

No wonder Scotland’s farmers are being refused permission to make themselves more reliant on renewables – that would reduce profits for shareholders.  

Scotland’s infrastructure should be in Scotland’s hands – and that can only happen with independence

Scotland never voted for the Conservative government that chose to privatise the National Grid. The companies that were formed have made billions for their shareholders out of Scottish businesses and families.  While the companies that own Scotland’s infrastructure are traded on the international market, the “weak” grid is failing the country. 

Only with independence can Scotland change this situation and invest in this vital infrastructure that holds the key to moving away from carbon to Scotland’s cheap and plentiful renewable energy.