It’s all change at National Grid this month with a significant cash injection and some organisational change.
In the UK, we use the term ‘national grid’ for the electricity transmission network. It’s the infrastructure that gets the energy from the power station into the plug sockets in our homes. However, behind the national grid, there’s National Grid, a multi-billion pound, multinational company. National Grid, headquartered in London but with additional operations in the US, is one of the largest privately-traded utility companies in the world.
In May 2024, it set out plans to upgrade its networks, as well as some organisational changes. In this article, we’ll tell you more about it. Let’s get started.
Massive investment
National Grid has announced plans to invest £60 billion in upgrading its infrastructure over the next five years. This cash injection will be split roughly 50:50 between the UK and the US.
This investment initiative’s overarching theme is decarbonisation. Of the UK-allocated money, around £23 billion will be spent on electricity transmission, including 17 Accelerated Strategic Transmission Investment (ASTI) projects connecting the UK power network to offshore wind farms.
A further £8 billion will be allocated to upgrade the distribution network, enabling more people to use low-carbon technologies, such as heat pumps and electric vehicles.
How will they get the money?
National Grid plans to find the money through a variety of ways, including:
- A £7 billion rights issue to shareholders. This is the biggest of its kind outside of the European banking sector for 15 years
- Selling off assets, including the Grain liquified natural gas terminal
- Divesting National Grid’s 20% share in National Gas Transmission
- Selling the Electricity System Operator (ESO) to the government, due to take place later this year (see later in the article)
- Selling its US-based onshore wind and solar operations
As a company, National Grid is doing well, with pre-tax profits at £3 billion from the start of the year to the end of March. However, this figure is down 15% from the previous quarter, with exceptional events such as storms in the US cited as the reason for the drop.
Organisational change
The announcement of the new investment wasn’t the only big change at National Grid this month.
National Grid also completed the organisational separation of the Electricity System Operator (ESO) ahead of its sale to the government, where it will become the National Energy System Operator (NESO). This transition involved the moving across of 500 staff.
ESO runs the control rooms that move electricity around the UK, so there is always enough power when it’s needed. ESO does not generate or sell electricity; it solely runs the distribution network.
The only part of the sale still to go through is the financial transition, which is due later in the summer. ESO’s move from National Grid into the government’s hands began in 2019, when it separated legally from National Grid.
Looking to the future
It’s great to see National Grid committing so much money to upgrading its networks in order to reduce our reliance on fossil fuels and focus on renewables. In a volatile world with issues in Russia and the Middle East, the more the UK can rely on its own energy production systems, the better. It’s also better for the planet, of course.
In addition, one of the most welcome parts of this news is that because it’s privately funded through shareholders and asset sales, the upgrade won’t affect consumers’ bills. We hope to see more similar initiatives in the energy industry in the future.