Nobody is accountable for the portfolio

Last year NESO delivered 8,100 planned outages on the electricity transmission network. Over the same twelve months it cancelled or rearranged another 15,300. That is the National Audit Office's figure, published last Friday, and it means roughly two-thirds of a year's outage work did not happen the way anyone intended.

An outage is not a small administrative thing. It is the moment when the company that owns a stretch of network, the contractors upgrading it and the operator balancing the system all have to agree on the same window at the same time. Some cancellations are unavoidable, because faults happen and system security comes first. The NAO puts the rest down to changes by NESO or the Transmission Owner, including work overrunning and needing longer access than it asked for, and planned work being pulled forward. Coordination made visible, in other words, and going wrong more often than it goes right.

The report is the NAO's value for money examination of the grid upgrade, and most of the coverage will settle on the money. Up to around £70 billion of investment over six years. Constraint costs already at £1.9 billion a year and potentially reaching £7.8 billion by 2030 without acceleration. Sixty-four projects still to build, most at an early stage, and three that NESO said two years ago should be accelerated which have not been.

Worth going to Part Three instead. That is where the NAO looks at how the whole thing is overseen, and it found four limitations. Nobody is accountable for the overall progress and value for money of the portfolio. The board set up to oversee it has started to operate as a portfolio management function but does not yet track whether the portfolio as a whole remains on course. Transmission Owners share project information voluntarily. And DESNZ, the Clean Power Unit and the board itself have few formal powers, depending instead on influence and coordination across government.

Read individually, each of those is a gap with a fix, and the NAO proposes one for each. Read together, they describe a £70 billion portfolio being delivered by organisations choosing to act in concert when none of them has to and nobody answers for it if they do not.

The tempting response is to call for somebody to be put in charge, and I think that would be wrong. The grid is owned by three private regulated companies, and a government body with directive power over their delivery decisions would be a different regulatory settlement from the one we actually have. The NAO does not recommend creating one. The more useful question is what has to be true for influence to work, given that influence is what is on the table.

Which brings me to the part of the report I keep going back to. The NAO's recommendations are all structural, and they are sensible: a single consistent view of portfolio performance, agreed definitions of milestones, common reporting across organisations, clear routes for escalation, responsibility assigned for specific interventions. Those are exactly the recommendations an auditor should make, because an auditor's job is to test whether the machinery is adequate.

But every one of them assumes a behaviour the structure cannot supply. Agreed definitions of milestones require organisations to reach agreement at the precise point where their commercial positions pull apart. Common reporting requires a company to report a slippage it could comfortably manage quietly for another quarter. Escalation routes require someone to escalate, which in practice means raising a problem across an organisational boundary, in writing, about a colleague's programme, early enough to be useful and therefore early enough to be unwelcome.

On paper these are processes. In practice they are things people do or avoid doing, and whether they do them depends on whether they have the skill to raise the issue well, whether their organisation actually permits it, and whether they will do it when it costs them something. Build a portfolio management function with excellent definitions and no licence to use them and you get better documentation of the same outcome.

None of this is a criticism of the NAO, which is careful about the limits of its evidence and could not have assessed it anyway. Whether people inside a delivery system will tell each other the truth in time is not a value for money question. It is just that the recommendations make it the decisive one, and nobody in the present arrangement owns it.

There is a detail in the risk data that points the same way. Asked what threatens their projects, Transmission Owners named skills most often, on 22 per cent of the 64 remaining projects, then supply chain, planning process and system access. Environmental issues and community opposition, which dominate the public argument about pylons, came in at 3 per cent each. Four of the top five reported risks are problems of people, contracts and the coordination of one organisation's work with another's.

Curiously, the capital markets have reached the same place from the opposite direction. Standard Life and Santander published a financing paper this month, researched by Baringa, which reports that banks provide more than 90 per cent of clean energy project finance debt. Their explanation is that construction and early operation are where risk is highest and financing most complex, and institutional money can only come in once construction risk has fallen away. It is sponsored research and its estimates are modelled rather than audited, so treat the numbers with the caution they deserve. The underlying judgement is harder to argue with. The market prices the window between financial close and stable operation as the most expensive phase of an asset's life, and it does that on purpose.

Two weeks from now a good part of the sector will be at ExCeL for GRID, and Ofgem, NESO, National Grid and SSEN are all on the programme. Every organisation the NAO names will be in the building. Whether anyone wants to talk about the outage number rather than the £70 billion is the thing I am curious about

References:
https://www.nao.org.uk/reports/upgrading-the-electricity-transmission-network/
https://www.standardlifeplc.com/news-and-views/uk-energy-transition