Utility Week

8 | 26TH APRIL - 2ND MAY 2019 | UTILITY WEEK Interview 8 | 26TH APRIL - 2ND MAY 2019 | UTILITY WEEK Interview strategic creativity has until now gone largely unnoticed by the public. "That's one of the reasons I'm here," he explains. "I've worked for Transport for London, for government and I've been an academic. Yet this is the most strategic organisation I have ever worked for." Strategic philosophy A key factor behind that strategic focus is that Northern Powergrid is part of Berkshire Hathaway Inc, whose chief executive is the famous US investment guru Warren Buffet, the ultimate long-term investor. With no dividend requirement, the company's philosophy is about capital appreciation and long-term value. "We focus on customer value because we're more worried about where we'll be in 20 years' time – in fact, in 100 years' time. It inspires a stewardship approach and it infects every way you think about things." Regulatory integrity lies at the "absolute heart" of the corporate mission. "We believe in the regulatory con- tract. We believe Ofgem is acting, if you like, as a pseudo customer. And we want it to do a really good job because we think that drives the right behaviours for us." In many ways, Northern Powergrid's heterogenous patch is the perfect regulatory testing ground for con- sumer service and resilience, taking in the affluent Harrogate and Richmond, along with areas of severe deprivation. About 60 per cent of its customers are eligi- ble for the priority services register. It covers three of the UK's largest cities, as well as some of the most rural parts of the country. Erwin is excited about meeting the long-term chal- lenges and opportunities this brings, viewing now as the dawn of a whole new era for networks. "If you go back ten years, people talked about 'dinosaur DNOS' running passive networks the last mile to people's homes. "That world has completely changed with the shi– to distributed generation and the combination of cheaper control and cheaper computing. "I now genuinely believe that working for a distribu- tor is where the action is." Building resilience As an evolving energy climate turns up the spotlight on networks, Erwin is happy to talk about Northern Power- grid's track record on reliability as delivering "at some- thing like 99.99". That said, a customer can have on average between 30 and 40 minutes without supply per year, and this is something the company is working to reduce. The continual challenge is striking "a balance between providing a perfect service and something that is infinitely expensive", says Erwin. Yet Northern Powergrid's de-industrialised legacy infrastructure offers a distinct advantage in the new net- work world ahead. It may be old, but it was a network built for steel works and coal mines. It is only really just starting to see significant constraint issues, unlike some networks operating further south. Investing in innovation If resilience is at the heart of the company's thinking, innovation looks to be at the forefront. The company boasts a host of initiatives, such as early flexibility schemes ACE (Activating Customer Engage- ment) and its customer-led network revolution, both now informing current strategy. It has also teamed up with Nissan as part of a consortium trialling a major vehicle-to-grid [V2G] project. But without a crystal ball, can Northern Powergrid truly plan for the uncertain tech- nological times ahead? "We don't know what the future is, and policy is changing all the time. So we make 'least regret' investments, because option value is really important. "Yet we also can't imagine a world where having more automation and more switching on the network isn't a good thing." Key, he says, will be ensuring a strong focus on the compelling value propositions for customers. In terms of electric vehicles [EVs], for instance, he wants as many charging points as possible to optimise the system, feed as much energy as possible into a smarter grid and allow people to easily and automatically make use of cheap available energy via their smartphones. "Let's put in place the back-office infrastructure that lets computers optimise a life for us." But what about managing these demands? "In a dumb world, you'd plug your car in with everyone else between 5 and 7pm. In a smart world, you'd say I'm leav- ing at 7am for work and will need 30 per cent of my bat- tery, and this gets done at the best time for you. "We see ourselves as facilitators of this future system, as providers of the physical infrastructure. And, while it's difficult to look ahead, we want to be that for our cus- tomers of the future too." In the last price control round Northern Powergrid received an explicit allowance for deploying smart grid technology and is investing in a bigger, thicker data hub to talk to substations more quickly and provide more pervasive control and measurement. Having "seen the value" with lots of switching capacity, it is also now put- ting more in place. Because completely rethinking the way networks are run has become imperative, says Erwin. "We used to run this very reliable, quite boring, passive network, to serve demand, plus headroom – the network is running at a fraction of its capacity most of the time because it's engi- neered that way. "DSO recognises that paradigm, but that we can now use that capacity in a different way. We can switch a net- work remotely but also, with smart meters and home services, EVs and smart charging, we can control supply and demand. We can run an 'active system' with much less headroom and release capacity when we are not using it, without having to build more network. "We want to be the platform that lets people get the benefits of smart flexibility, we think we have to be, because customers connect to us, they don't connect to National Grid." And Northern Powergrid, which employs around 2,700 people and is engineer led, is prepared, he tells me. "That's not complacency. What it means is that whereas the wave is crashing over some of the other DNOs as we speak, it's not quite crashing over us yet. "That's an artefact of history and geography as well as everything else. So, we are not dealing with a crisis, but we can see it's coming." Nevertheless, you're really going to have to get this one right, aren't you, I ask him. "Yes, getting it right is critical. But equally we don't have a choice. Digitalisation and home automation are happening. The question is, are we going to have managed change or disruptive change? Because if it is disruptive, that's more power cuts." "We don't know what the future is, and policy is changing all the time. So we make 'least regret' investments."

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