Wind of change as National Grid looks to renewables for growth
17th May 2018 | Commercial Energy
National Grid is one of those businesses that everyone assumes is quintessentially British. Today’s full year results, though, highlight that it is increasingly a Transatlantic company.
Operating profits from its US operations were £1.7bn, the same as they were from the Grid’s better-known – at least to UK consumers – UK electricity transmission business, although the UK remains, for now, the Grid’s most important geographic market hanks to its activities in gas distribution.
The US, where the Grid is one of the largest suppliers of household energy, including the evocatively named New York State-based utility Niagara Mohawk, is growing in importance, though. The US now makes up 45% of the Grid’s regulated asset base.
That can be seen by the Grid’s investment during the last 12 months. While it invested £1bn in its UK electricity transmission operations and a further £310m in its gas transmission arm, the Grid invested $3.3bn (£2.4bn) in its US businesses, driven by the need to replace and reinforce ageing infrastructure. This will involve literally thousands of small to medium-sized projects in New York, Massachusetts and Rhode Island.
John Pettigrew, the chief executive, said, “We expect to invest at least $10bn over the next three years. This falls into three areas. This is mandated spend to replace older gas mains that are prone to leaks, storm hardening for our electric networks and other initiatives to modernise our networks and provide new connections with gas and electric customers.”
This partly reflects a quest for stronger growth. The US has offered stronger growth than in the UK, where the Grid is gradually exiting activities like gas distribution, where returns are lower.
Also influencing that decision is the likelihood that the returns the Grid can make from its gas and electricity networks in the UK are likely to come under further pressure from Ofgem during the next regulatory period, called RIIO-2, due to come into effect in 2021.
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