Utility Week

UTILITY WEEK | FEBRUARY 2023 | 23 Energy Lawrence Slade is con dent: "Quite natu- rally if the opportunities are there the inves- tors will follow. There is a wall of money out there. Just within our members we conserva- tively reckon that $250 billion is 'dry powder' ready to go." Slade, who joins the Energy Networks Association as its chief executive in Febru- ary, continues: "If you think that a lot of the funds are raising investment geared around sustainability, they are looking for a home for that in clean energy and sustainable investments. When you are looking at the future – certainly of the electricity network – it will be a popular destination." Of course, the UK is in a global competi- tion for that funding and Slade says: "We have to make sure that we have viable pro- ject pipelines and we are being clear about where the opportunities lie." But Jewell reiterates: "As long as the boundaries ensure that as regulated entities we know the extent of what we need to do, and we know that we are giving best value to customers, it doesn't really matter." Is the future real or virtual? Will network incumbents' futures be mainly xed assets or will they be managing markets? Our interviewees were unanimous: net- works will be the backbone of a future decarbonised system that is balanced and managed by the demand side as well as the supply side. But we have already seen that their footprint, whether that is geographical or within energy supply, may change. A key question is how much will incumbent net- works be about maintaining and operating real assets and how much will they be about managing markets? SSE head of future networks Stewart Reid says that: "It is more about real asset management than it ever was." That is because "marketplaces are additional to the assets. Without the assets you have no marketplace". In fact, Reid foresees huge expansion – and not simply in connections to the many expected new assets. He explains: "To allow the marketplace to operate e— ectively you need to manage these assets in a more detailed manner. You need much more vis- ibility of the assets, you need a control mechanism in place and that results in the existing asset still being needed. But the complexity increases." He uses roads as an analogy: "When things get busy, you have to introduce things like tra™ c lights, toll systems, tra™ c-control systems. We have to install equivalents in our network. What you end up with is the asset that was always there but you have the additional layer of management that is required over and above the original asset when you just had a simple network." Nicola Pitts, executive director at the Inde- pendent Networks Association (INA), looks at it from the user point of view: "Managing the real assets will probably be more impor- tant. People want them to be resilient and they probably want them to do more than just be capable of doing maximum demand. And they have to be capable of Ÿ exing the technical aspects. In some ways that part of the networks' job will become more complex. We have to think towards the future and cli- mate change, so there is a strong focus on storms and the resilience of networks. I think that will still be a very important job and come bit higher in the pecking order. " Considering incumbents more broadly as areas of the grid are taken on by independ- ent networks or other third parties, Lashford is open to the suggestion that incumbent networks could nd themselves largely being the connectors between a patchwork of third party network owners and operators, unreg- ulated networks and building network oper- ators. "They could well shrink to be linking other areas." A new mix of roles for the network, based on system operation as well as asset man- agement, is a di— erent prospect for investors than the large incumbent networks, and may present higher risks. But investors have a view of the activities of types of companies in the sector and will direct investment to companies that match their risk appetite and reward. Slade says it will look familiar: "In large part I don't see it changing. From an inves- tor point of view you are still going to have a regulated asset base. You will still need a system to carry power around the country at the local and national level. That element is still going to be there." He adds: "Coming o— of that, there will be multiple services that t more into the future commercial arrange- ments in the market, which are out for con- sultation at the moment." Slade adds: "I think it will change dra- matically on the commercial operation and some of the commercial opportunities going forward but I think the regulated asset space will still be there. It will be in a di— er- ent form, because it will have to grow as we electrify more things, so that element will be there and I think the scale of investment that is required is going to be huge." in association with What will the energy networks of the future look like? A Utility Week research report in association with Salesforce November 2022 CONTENTS Download the report Download the report What Will the Energy Networks of the Future Look Like? free at: https://utilityweek.co.uk/what-will- the-energy-networks-of-the-future-look-like/ "We have to make sure that we have viable project pipelines and we are being clear about where the opportunities lie." Lawrence Slade, chief executive, Global Infrastructure Investor Association "We have to make sure that we have viable project pipelines and we are being clear about where the opportunities lie." Lawrence Slade

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