Power play: an interview with John Pettigrew

National Grid’s role in UK energy is unique. With responsibilities spanning gas transmission and distribution, electricity transmission, interconnection and system operation, and with camps on both sides of the Atlantic, it is a leviathan with broad and deep influence.

It’s approach, therefore, to the challenges of energy system transformation is critically relevant to other players in the landscape. Its decisions to embrace or reject certain trends, technologies and market developments will directly affect the shape of our future energy system, and the pace at which that future is realised.

The man responsible for endorsing and implementing National Grid’s approach to system transformation is John Pettigrew, who succeeded Steve Holliday as National Grid chief executive in May 2016.

Pettigrew’s career – which has played out entirely at National Grid since he joined as a graduate trainee – has instilled a deep-seated fascination with the ongoing process of change enveloping the energy industry. It has also given him varied perspective, gained through roles in most parts of National Grid, from gas distribution to electricity system operation and a stint in the US business.

What views has Pettigrew developed about some of today’s key system challenges? 

Should there be an independent system operator?

One of the advantages of being a round a long time is that I have seen the SO role evolve. I actually ran it for a while. It has constantly evolved. I find it interesting that people talk about the future transformation of the energy sector – actually we are in the midst of it.

There’s obviously a lot of talk in the market about perceived conflicts of interest. The National Infrastructure Commission has said no, they couldn’t find any evidence of it, but from our perspective we realise that we have to give the market confidence. That’s why we support ongoing work at the regulator to understand the evolution of the system operator.

My personal view is that I don’t think an independent system operator is right for the UK now. Partly because there are 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 independent system operator. It’s is not clear that the benefit to customers would outweigh the risks in doing that. 

How do you think the relationship between electricity transmission and distribution will change?

Clearly, in my view, DNOs are going to have to become more active managers of their networks.

The move will be an evolution. We are going to have to redefine the interface [between transmission and distribution] and the flows of data. People are going to have to take a holistic, whole system approach. Is it right to invest in transmission? Is it right to invest in distribution? Is it right to put storage in place – and if so, where?

Do you think new system operation pressures at the transmission and distribution level necessitate the creation of a new system architecture or architect role?

I’m not sure that is the right answer. That sounds like a concept in which there is a single body which has overarching control over the whole network from 400,000V down to 230V.

In my view, when you think of the system as an ecosystem, it’s going to be incredibly dynamic and I’m not sure that a single body controlling it in all its aspects is going to be possible – it sort of sounds like the CEGB [Central Electricity Generating Board] doesn’t it?

I think we are moving into a world in which there will be new players, new technologies… energy is going to flow up the network as well as down and therefore what you have to do is create an ecosystem in which everyone can thrive. So clearly the SO has a role. I suspect the next step is a clearer interface between the transmission and distribution networks. 

The new Enhanced Frequency Response mechanism has provided a route to market for some energy storage providers, but it has also been criticised for resulting in unsustainably low contract prices for winners. Do you think this is fair?

From the point of view of the SO, what we did was put a tender out. I mean, from a customer perspective, it’s a good thing isn’t it?

We were genuinely surprised to see 1.2GW offer up based on our need – 200MW.

The winners bid into a market against the rest of that 1.2GW and I guess we were pleasantly surprised that we were able to get that service at a price that will probably save customers about £200m, against the alternative of having traditional generators do it.

For the people who are building that storage, they’ll be looking for revenue streams elsewhere to support that [low contract price].

Some industry commentators predict that growth of energy storage combined with embedded generation will make it difficult for the grid to support its costs in the future. This is a concern that they have taken to Number 10. Do you think it is valid?

The concept that storage and solar, in the short term, are going to reduce the vast majority of the use of the network is not something I’ve talked to Number 10 about because I don’t think they would believe it – I certainly don’t believe it.

We are seeing significant reduction in prices of storage, but in most of the scenarios that I’ve seen, optimistically, you’re talking about three, maybe three and a half GW by the early 2020s. So, against the backdrop of how much generation there will be in the UK, it’s not going to change the fact that the vast majority of the energy will still flow through the networks.

What is your view of Ofgem’s efforts to reform the benefits regime for embedded generation?

There needs to be a more holistic review of charging. I understand the drivers for the embedded benefit review – looking to make sure that it is equitable in terms of making sure that everyone who is using the network in some shape or form is paying their fair share. But I think that it would be more useful at some point, pretty soon, to do a more holistic look. Not just at the transmission charge and the distribution charge but at charging for networks generally. We are encouraging Ofgem that this is the direction they should take. A holistic look at charging.

This can’t be rushed. If you rush it, it will be problematic. It’s not a simple thing doing a charging review because ultimately there’s a cost to operating the network. People can argue about whether it’s efficient and how it could be more efficient and that is what price controls do. But ultimately, in a charging review there’ll be winners and losers – anything that moves away from where we are today will mean winners and losers and therefore it needs to be done in a timely and sensible way to take all stakeholders with you. 

Ofgem has recently suggested some changes to network innovation funding, including ideas on how to make it more accessible to third parties. What do you think about this?

I think it’s a positive step. Generally, when you compare their approach to regulators elsewhere, I think Ofgem is at the forefront in its approach to encouraging innovation.

Finding ways to involve third parties more closely builds on good stuff that is already happening in terms of partnerships. For instance, National Grid has worked hard to bring in partners for our gas distribution business to develop biogas connections. For those partners, they see benefit in working with utilities because, of course, they are trying to deploy new assets on our networks. Going through that innovation cycle – having the opportunity to work with the utility to test and make sure the product is providing what is needed – is helpful.

Smaller technology firms can bring a lot to the innovation process because they tend to be nimble and technically savvy. What they don’t have, necessarily, is good asset management, or an understanding of the regulatory environment, or realtime operations. When you put those things together you have a powerful combination. 

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