National Grid warns that plans to build more undersea cables could be derailed by political meddling
Buying cheap power from France boosted National Grid’s profits in the first half of the year – but the group warned that plans to build more undersea cables could be derailed by political meddling.
The company has seen low-cost electricity from the Continent flow into Britain, where prices are higher, boosting its domestic profits by 7.7 per cent to £1.2bn.
Overall its pre-tax profits fell by 11 per cent to £1.1bn after it faced higher interest payments and a fall in profits in its struggling US business.
National Grid said it could also be forced to issue industry warnings across the UK this winter as the gap between the energy available and demand is squeezed.
A NISM – Notice of Insufficient System Margin – is sent out to generators when power is in danger of running out, and calls on them to produce more electricity.
Last year, Grid did not have to issue any but it is expecting to have to release them ‘on occasions’ in the coming months.
The network giant plans to build five more undersea electricity lines linking the UK, Europe and Iceland, but said it needed a ‘stable political environment’ to attract the investment needed. It has obtained permission to build three, which are shown on the map.
The final decision over two of these projects, piping electricity from Belgium and Norway, is due to be taken next year.
Each is expected to cost in excess of £500m. National Grid has yet to obtain permission for two others.
Britain is facing tight conditions this winter, with large numbers of power stations having closed down since last year.
A fifth of the UK’s power capacity will close down in the coming decade.
At the same time, the Government wants the UK to move to low-carbon power forms, such as wind and nuclear – requiring tens of billions to be spent in the coming years. But increased political involvement in the sector is harming investment, Grid warned.
‘We haven’t seen many commitments to new power stations in the last few years,’ said UK boss Nick Winser.
‘There’s still money being spent by developers – but the final investment decisions are not being made.’
The group had been expecting 6,000 megawatts of new power stations over the next three years – but has now downgraded that to just 2,500 megawatts.
He added: ‘I can’t overstress the importance off a stable political background because these are long-term investments that we need to make.’
The Government is bringing in new laws to try to guarantee stable returns for investors in low-carbon power. These are expected to come into force next year.
National Grid shares, up 10 per cent in the past year, rose 5.5p to 773.5p.
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