There are some companies which stand to benefit hugely from the transition to a zero carbon world. One such is National Grid. To reach net zero, the world will need to go substantially, if not wholly, electric, and to do this, moreover, while simultaneously stripping out virtually all sources of fossil fuel generation. As things stand, electricity is only about 20 percent of the energy mix in the UK. In theory, then, the capacity of the electricity system will need to expand five fold. In practice, it might not be as extreme as that. Dynamic charging – especially for electric vehicles, where refueling can be incentivised to take place when it is most economic – in combination with much greater use of storage, might substantially cut the amount of additional generating, transmission and distribution capacity needed. It might also be possible to go carbon neutral and still avoid using electricity for domestic heating by switching the natural gas network to biogas or hydrogen. But whichever way you cut it, the investment needed to reach net zero is going to be massive, requiring bold policy action to make it happen. The good news is that from a technological point of view, reaching net zero in thirty years or less is now perfectly doable, and is also relatively affordable, thanks to the plummeting costs of renewables and storage. Even ten years ago, this would not have been the case. Labour plans to renationalise the electricity industry, including National Grid, act as a further deterrent. The curiosity here is that like the pound sterling, the more the present Government disintegrates, the more the share price rebounds. Yet a Jeremy Corbyn led alternative, intent on nationalising everything in sight is surely going to be considerably worse for investors than even a no-deal Brexit, particularly when it comes to the Grid, where softening the company up for renationalisation at a knockdown price by first imposing an “excessive profits tax” is an all too likely prelude. Some comfort can be drawn from the fact that to renationalise, Labour would have to legislate. Even so, the assumption that Labour could never win the majority to do this is perhaps an unwise one. There is plenty of ruin that can be inflicted even by a minority Government incapable of doing very much, as we are learning to our cost. It’s the Labour Party conference next week, and there is no sign of retreat from the nationalisation pledge. Rightly or wrongly, the Labour leadership thinks it popular. It also believes that taking back control from a private sector accused of dragging its feet on climate change the only effective way of achieving the necessary action. What of monopoly utilities profiteering at the expense of consumers? Actually, transmission costs are only 3 percent of the average electricity bill. The idea that nationalisation of the Grid would see massive reductions in consumer bills is therefore risible. Consumers have benefited nine times more than investors from the near 20 percent real reduction in transmission costs privatisation of the Grid has yielded. Nothing will be solved by renationalisation; regaining control of the “commanding heights” is an entirely ideologically driven ambition that is likely to do economic investment in the sector untold damage, and by the by, scupper any chance the nation has of meeting its 2050 net zero target.
Telegraph 17th Sept 2019 read more »