Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/749133
UTILITY WEEK | 11TH - 17TH NOVEMBER 2016 | 7 Interview I t's been eight months since John Pettigrew stepped into the biggest and most influential job in the UK energy industry. As chief executive of National Grid, he holds the reins at Europe's most successful utility by far. With a share price riding at £10 a pop and a market capitalisation of £38 billion, it is a leviathan, with activ ities spanning gas and electricity transmission and dis tribution, interconnection, system operation and more. However, despite the company's powerful posi tion, the environment Pettigrew has settled into as chief executive is far from secure. Around him, the energy landscape is in the throes of rapid and turbulent changes, some of which threatens to strip his organisa tion of key responsibilities. Others may undermine its profitability. If Pettigrew is perturbed by these challenges, how ever, you'd be hard pushed to tell. When Utility Week meets him at National Grid's head office, overlooking the hustle and bustle of Trafalgar Square, he has the occasional smile for questions about radical technologi cal and regulatory transformation ideas, but is other wise neutral and measured in his appraisal of energy system transformations, from decentralising technolo gies to charging regime reviews and the postreferen dum government. In part, this poise has its foundations in Pettigrew's long and varied career at Grid, which has seem him hold all manner of roles since joining as a graduate trainee 25 years ago. He accelerated rapidly to senior positions, being appointed director of engineering in 2003; chief operating officer for the US business from 200710; chief operating officer for the UK gas distribu tion businesses from 201012; and UK chief operating officer from 201214. Before occupying such illustrious positions, he also had solid handson responsibility in roles including network charging and system operation. He mentions the latter as we launch into discussion of the idea that Grid should be stripped of its system operator (SO) role and a new independent system opera tor (ISO) established instead. Debate has smouldered for years on this issue, with significant concerns voiced in expert communities about the ability of Grid to avoid conflicts of interest between its SO responsibilities and its many other businesses. In the past year or so, these concerns have flared up, fuelled by worry that conflicts of interest could under mine the move to a low carbon energy system. In July this year, for instance, the now defunct Environment and Climate Change Committee (ECCC) said that, despite Grid's best efforts, the potential for damaging conflicts of interest were "growing and intractable". In particular, it said there was scope for Grid to push for unnecessary asset investment and to unfairly advantage its intercon nectors over, novel forms of distributed and renewable energy technology. The ECCC urged Ofgem and govern ment to act "as soon as possible" to remove these risks. Pettigrew coolly acknowledges these concerns and Grid's responsibility to "give confidence", but he is ada mant that the company ought to retain its SO role for the foreseeable future. "My personal view is that I don't think an independ ent system operator is right for the UK now," he states. "There are a huge amount of things to focus on as we undertake transformation and – with a focus on security of supply – it would be incredibly disruptive to move to an ISO. It is not clear that the benefit to customers would out way the risks in doing that." Grid has made this belief clear to government and the regulator. But is Pettigrew confident that they agree? "It's difficult to judge," he says. "They are very aware of the need for inward investment, given the amount that we need to do. They are very aware of the security of supply issues. But I think they feel that they want to respond to that market requirement that there is confidence in the independence of the system operator." By the time Utility Week readers have this interview in front of them, the government's reconciliation of these concerns may be somewhat clearer. The smart systems call for evidence was published on 10 November and it set out thoughts from Ofgem and the new Department for Business, Energy and Indus trial Strategy (BEIS) on the scope for an ISO, as well as a range of other topics, including ways to enable a wider deployment of energy storage in the UK by removing "undue market barriers". This is something Grid has taken an active hand in too, by signing landmark contracts in August for enhanced frequency response (EFR) with seven energy storage providers. The EFR mechanism "was not lim ited" to bids from storage providers, but storage proved to be "perfect" for fulfilling its subsecond grid support requirements, says Pettigrew, who believes the contracts demonstrate Grid's commitment to embracing new ways of operating the system and engaging with new players. Broadly speaking, representatives from the storage industry seem to agree. The eight EFR contracts, worth £65.95 million in total, were welcomed as a boost to mar ket confidence. But praise was not unanimous. Some complained that the tender was not big enough – 1.2GW