National Grid
The partnership between National Grid and Risilience shines a light on the benefits of a data-led transition plan and the value of insights enabling the strategic allocation of resource to yield best returns.
The challenge
National Grid is a global energy company; the largest electricity distribution network in the UK and a major, direct-to-consumer supplier in the US. Its subsidiary companies, National Grid Ventures and National Grid Partners, operate internationally to help accelerate the transition to green energy through investment in innovation.
As the world grapples with the pressing need to curb emissions and adapt to a shifting climate, businesses, like National Grid, find themselves facing often nebulous and unquantifiable risk. Many companies have entered the race to net zero, as part of global efforts to tackle climate change, but research indicates that those goals are rarely supported by credible infrastructure and data.
“The change that’s happening in the market at the moment is that the understanding of climate risk was vague and very qualitative even a year or two ago,” explains Risilience’s Vice President of Client Solutions Tom Sabbatelli-Goodyer. “Having a starting point to understand what the dollar amount of that risk is, and moving toward a more rigorous way of being able to understand balance-sheet impact, I think is really transformational for a company.”
National Grid’s climate targets are ambitious. The company recently published its $42 billion UK investment strategy, with the aim of reaching net zero by 2050. In partnering with Risilience’s unique technology, National Grid is taking concrete steps towards its vision for a greener, more sustainable future.
The approach
UK-based National Grid Electricity Transmission (NGET) has made considerable investments in the high-voltage electricity transmission network to help connect more renewable and low-carbon electricity, transporting it through the infrastructure of power lines and substations to reach local networks. NGET plays a crucial role in turning the UK’s net-zero ambitions into a reality – so it seemed like a logical starting point for a partnership between National Grid and Risilience.
Making companies more comfortable with the uncertainty in their climate transition is a part of Risilience’s mission. “You have to embrace some level of ambiguity,” Sabbatelli-Goodyer said. “A lot of companies just need to start somewhere because it helps to take that first step. When you’re seeing the results of analysis, you then realise where the gaps are – or it exposes gaps that you didn’t know were there before.”
Risilience is all about helping companies bridge the data gap that’s blocking them from taking the plunge into climate transition. Before pairing with Risilience, NGET lacked a solution for streamlining the data it procured for both its business and climate strategies.
Liam Goucher, Climate Transition Manager at National Grid explained: “We had sustainability and environmental experts working on the strategy around decarbonisation, and we had finance professionals working on future OpEx and CapEx, and the opportunities from those initiatives. But we had not fully linked the two before, certainly not in a consistent way.
“With Risilience as a partner, we saw the opportunity not only to model the CapEx and OpEx cost of climate initiatives, but also factor those insights into future performance against a range of different emission scenarios, which started to make us think about how we could use and replicate this approach across different parts of the business.”
A lot of companies just need to start somewhere because it helps to take that first step.
Tom Sabbatelli-Goodyer, Vice President of Client Solutions, Risilience.
Of the five different initiatives that Risilience modelled, it was shown that NGET’s ongoing efforts to connect more renewables to the grid had the largest impact on reducing emissions. Using its digital-twin technology, Risilience identified the initiative with the most profound impact on emission reduction: connecting renewables to the grid.
Risilience also helped NGET name lesser-impact initiatives, establishing a hierarchy of priorities for the team at NGET and identifying the most efficient path for resources.
Further, with a focus on supply-chain data, Risilience took a dive into the decarbonisation pathway of some of NGET’s raw materials, bridging conversation between the climate and global procurement teams, while linking decarbonisation strategies with their financial impact.
“These conversations are good to start,” said Goucher. “It’s almost a newer thing – growing accustomed to modelling out transitional risks and what the financial impact looks like at different temperature thresholds. There’s been a lot more uncertainty around it but you have to start somewhere.”
The pilot project also modelled scenarios with the applied initiatives, carving out a pathway for a full, net-zero plan that stretches to 2030, and stress tested NGET’s initiatives to ensure they are cost-effective under more ambitious climate scenarios, breaking even at a 2.5C (36.5F) aligned pathway.
Goucher said of the partnership: “I think the thing that excited us from a grid perspective was being able to take those bits of data that existed around energy transmission, bring them together, make them consistent, and then dig into the financials.”
I think the thing that excited us from a grid perspective was being able to take those bits of data that existed around energy transmission, bring them together, make them consistent, and then dig into the financials.
Liam Goucher, Climate Transition Manager, National Grid.
The results
The pilot project showed that, even under the more ambitious 2C (35.6F) or 1.5C (34.7F) aligned climate scenarios, the results would be more cost-effective for the business. In fact, the cost effectiveness of the initiatives increases with greater climate ambition.
One particular initiative, involving National Grid’s transition to EVs, showed savings of £3.5 million in total Opex, while reducing cumulative Scope 1 emissions by 57,000 tCO2e, in 2030.
Following the success of this pilot project, National Grid has continued to partner with Risilience, aiming to: use available data to build a digital twin of NGET; quantify four transition risks to the business; establish a methodology for building and running net-zero initiatives; and assess the relative cost-effectiveness and risk-reduction of all proposed initiatives.
“The Risilience solution has been instrumental in communicating with investors, shareholders, board, policy makers, customers and other internal and external stakeholder groups.
This feeds into the overall goal of analysing the ROI of proposed and future NGET decarbonisation initiatives as the company builds on its global transition strategy.
I think this project gets to the heart of identifying areas where resource allocation can yield the greatest benefits. If you have constrained resources or you’re only able to implement so many of these initiatives, you can focus your decarbonisation strategy on the areas that are most significant.
Liam Goucher, Climate Transition Manager, National Grid.
Learn how Risilience can help your business create an actionable net-zero strategy. Get in touch: contact@risilience.com
