How a lack of power grid capacity is holding back UK economic growth

Toddington Harper has found a creative way to help power his electric car chargers at a service station in south-west England because of limited capacity available from the grid.

The 45-year-old founder of charging company Gridserve added a high-capacity battery and solar panels to reduce the strain on the local electricity distribution network at the services off the A30 near Bodmin in Cornwall. “It works incredibly well,” he said.

Other businesses have been less fortunate. Martin Smith, chief executive of The Hex Group, a metals fabricator, wanted to install enough solar panels at his factory near Stafford in the West Midlands to ensure it was largely self-sufficient.

But he was told by the local network operator that he would have to pay up to £3mn to help fund grid improvements and would have to wait until 2032 to be able to install all the panels. “It’s absolutely scandalous,” he said.

Both examples illustrate the growing strains on the privately owned power distribution networks across Britain as businesses adapt to the government-mandated target of net zero emission by 2050. 

The decarbonisation of the economy is expected to double electricity consumption by 2050. Until now the problems had been largely evident on the supply side with new wind and solar farms struggling to get connections to provide the low-carbon electricity the switch to net zero depends on.

But the grid constraints are increasingly becoming pinch points on the demand side where businesses are looking for upgraded or new connections and delays are mounting.

Business groups have warned these bottlenecks threaten to hurt economic growth and derail the decarbonisation process and have called on the government to act. 

“Without an efficient national grid which supplies businesses with the energy capacity they need, as well as enough workers to fill empty jobs, the potential for growth will continue to be limited,” said Shevaun Haviland, director-general of the British Chambers of Commerce, who added that she raised the issue with the chancellor, Jeremy Hunt, last month. 

Catherine Cleary, a connections engineer at the grid consultancy Roadnight Taylor, said she had heard of lead times of between eight and 10 years for a new or upgraded grid connection. “Demand customers are now beginning to get caught up in the grid queue,” she added. 

For industries seeking to decarbonise, one of the main challenges of switching to a process that uses low carbon electricity to replace fossil fuels is the huge jump in demand for power. Whisky distilleries electrifying steam production, for instance, might require them to “increase their grid capacity by a factor of 10”, according to Cleary. 

Very heavy users, such as the steel industry, have identified electric arc furnaces as the technology to replace coke in the iron ore smelting process but the power they consume is huge. Electric arc furnaces typically use the equivalent each year to the power needed for as many as 200,000 homes, according to trade body UK Steel.

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British Steel, which is owned by China’s Jingye, is looking at replacing one of its two coke blast furnaces at its steel plant in Scunthorpe with a less carbon-intensive electric arc furnace.

But delays in securing a high-voltage grid connection have become a “significant hurdle” if the company is to meet its target to reduce its emissions by 2035, according to one person familiar with the project.

British Steel declined to comment specifically on the issue but said it was “looking to rapidly progress” talks with the UK government on potential financial support for its decarbonisation plans. 

“Without reform, the UK will lag behind in the global race towards a new green steel industry,” warned Frank Aaskov, energy and climate change policy manager at UK Steel.

Martin Mead, head of energy efficiency at DS Smith, warned that the FTSE 100 packaging group was unable even to evaluate switching to electricity to generate steam at its paper mills. “At the moment the national infrastructure is prohibitive,” he added.

Steve Freeman, director of energy and environmental affairs at the Confederation of Paper Industries trade body, called on the government to act. “We remain concerned that these grid reinforcement problems and costs have been neglected by policymakers.” 

Other entrepreneurs, like Harper at Gridserve, looking to build a business on the back of the so-called electrification of the economy, have encountered similar problems.

Last year, Ceres, a London-listed fuel cell and electrolyser maker, had to cancel plans to build a new technology centre after being quoted “prohibitively” long lead times of up to seven years for grid connections. “If we want to create high growth companies, it is not just access to skilled people, we also need the right infrastructure to match the pace of our growth,” said chief executive Phil Caldwell. 

Trade group Tech UK cautioned in a report in June that it took “too long and [was] too expensive” to get grid connections, holding back investment in facilities such as data centres and semiconductor factories.

Harper’s rivals have reported similar problems. William Bannister, chief executive of Motor Fuel Group, the UK’s largest independent petrol station operator, said it had “regularly” experienced delays in getting new charge-points connected. Ian Johnston, chair of trade group ChargeUK, labelled timely grid connections as “one of the biggest challenges faced by the sector”.

The Energy Networks Association, the trade group for network owners, which includes FTSE 100 companies National Grid and SSE, said they were trying to address the problem.

“There’s a relentless determination . . . to accelerate and improve this process for customers,” it said in a statement, noting that planning permission, which was outside its control, also caused delays.

There have been some changes to the queue rules for grid connections and the government said it was “working hand in hand” with the regulator and network operators to cut connection times. 

But the scale of the challenge ahead means the backlog is expected to mount. “[Network owners] are very supportive, they’re trying very hard, but there’s just too much on everyone’s plates,” said Harper. “Everyone is looking for grid capacity.”

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Letter in response to this article:

UK’s lack of grid capacity requires wartime response / From Andrew Dakers, Chief Executive, West London Business, London W12, UK