The government will bring part of National Grid back into public ownership to create a new authority to help Britain meet its climate targets.
National Grid will sell its electricity system operator (ESO) arm to the government, the parties announced on Wednesday.
The nationalized unit will then be integrated into a new Future System Operator (FSO), an authority responsible for overseeing UK electricity systems.
Jonathan Brearley, chief executive of energy regulator Ofgem, said: “A fully independent system operator will help transform the UK energy system and reduce customers’ energy bills.
“Essentially the FSO will ensure that we build a smart, efficient and flexible system which will mean Britain moves to a safe, low carbon and low cost system.”
The FSO will also take over some of the gas functions from National Grid. It will work with energy providers and grids to ensure the electricity system is balanced and there is enough supply for households and businesses.
The government did not reveal how much it would cost to renationalise the unit, simply saying that National Grid would be “appropriately compensated” for the parts of its business transferred to the new authority. The final deal has yet to be agreed.
Britain faces a huge challenge to stop emitting carbon. But as progress continues, cars will become more and more electric and gas boilers will slowly be replaced by heat pumps.
This will require a lot of additional electricity.
Not only will this require wind turbines and other technologies to generate the additional electricity, but the wires that carry the electricity will also need to be up to the task.
The new authority will supervise the new projects and contribute to their integration into the network.
It will cover everything from electricity and gas to carbon capture and offshore wind networks.
National Grid boss John Pettigrew said: “We have worked closely with government, industry and the regulator to create a future system operator that enables long-term holistic thinking, drives progress towards the net zero and lays the groundwork for needed regulatory reform. to ensure a clean, fair and affordable energy transition.
ESO is owned by National Grid, but was legally separated from the company in 2019 to avoid conflicts of interest.
It employs around 1,000 people. No job loss is expected as part of the purchase.
ESO Executive Director Fintan Slye said, “We warmly welcome today’s announcement that ESO will be at the heart of the system operator of the future.
“Building on our track record and skills as a world-leading system operator, working with industry, government and regulators, we will help deliver an affordable, reliable and clean transition for everyone.”
David Smith, Managing Director of the Energy Networks Association, said: “Coordination and cooperation between electricity and gas transmission and distribution networks, as well as all other players in the energy sector, will allow us to make even more progress towards decarbonizing effectively and efficiently.
The government is expected to announce its new energy strategy on Thursday, which follows the Russian invasion of Ukraine.
On Wednesday it announced it would back a £400million loan to technology company Johnson Matthey to help it develop new hydrogen technology that could help heat homes and drive trucks.