Heathrow Substation Outage: NESO Review

Statement

19:40:00

My Lords, I will now repeat a Statement made in another place. The Statement is as follows: “With permission, I would like to make a Statement on the publication of the report from the National Energy System Operator following its review into the fire at the North Hyde substation on 20 March. NESO’s review was commissioned jointly by the Energy Secretary and Ofgem in the immediate aftermath of the fire, which disrupted power supply to over 70,000 customers, including, of course, Heathrow Airport, which closed operations on 21 March. While power from the grid was restored quickly to customers, there were significant secondary impacts to the aviation sector due to the associated closure of Heathrow Airport. My right honourable friend the Secretary of State for Transport made a Statement to the House at the time, where she committed that the Government would update the House as soon as the relevant investigations had concluded. That is why I am making this Statement before the House on the day that NESO’s report has been published. Before I update the House on the key findings of the review, I reassure honourable Members that the Government are taking action in response to the report. We will urgently consider the findings of the review and have committed to publish a government response that will set out a plan on how the issues identified will be addressed in order to improve our energy resilience. Having reviewed the report, I am deeply concerned —I am sure honourable Members will agree—that known risks were not addressed by National Grid Electricity Transmission, a key operator of our electricity system. NGET’s own guidance is clear, and based on the elevated moisture samples that NGET took in 2018, the asset should have remained out of service until mitigating actions were put in place, or the asset should have been carefully monitored until it could be replaced. NGET failed to take action appropriate to the severity of the risk at North Hyde. That was most likely the cause of the catastrophic fire on 20 March. I spoke to NGET this morning and made it clear that the findings are unacceptable and that action must be taken to ensure that maintenance work on critical assets is prioritised appropriately. Fire suppression systems must not be left inoperable. I am pleased to see that the regulator is taking swift action in response to the findings, announcing today that it is opening an official enforcement investigation into NGET. Ofgem will consider any possible licence condition breaches relating to the development and maintenance of National Grid Electricity Transmission’s electricity system at North Hyde. I spoke with Ofgem yesterday to express my support for that investigation and the planned audit of National Grid’s critical substation assets. That will be essential to understanding any other potential risks on the network and ensuring that those are being mitigated appropriately. The report also highlights that North Hyde substation, which was built in 1968, is subject to different design standards from newer sites that were built during the 1990s. There was not sufficient distance or a physical barrier between two transformers at North Hyde, which allowed the fire to spread. It is essential that we consider the potential risk created by differing design and standards across the electricity network, particularly as we move towards clean power 2030. That will be a key focus of the Government’s response. My department and Ofgem will hold NGET to account for its role in the incident at North Hyde, but the extent of the impact of the incident on Heathrow operations must also come into focus. Heathrow Airport Ltd commissioned its own independent review, the Kelly review, which was published on 28 May and investigated the circumstances that led to the airport ceasing operations for most of 21 March. The review highlighted several recommendations to further improve the resilience of the airport’s internal electricity network. Those align with NESO’s findings that there are options to improve Heathrow’s own power resilience, which is the responsibility of Heathrow and not National Grid, and reduce the risk of further disruption at this scale. Heathrow benefits from three separate supply points to the electricity network. It is rare for any site to have such a resilient connection to the network. As no energy system can ever be free from disruption, this is an opportunity for Heathrow to consider investing in its internal electrical distribution network to take advantage of those multiple supply points. I welcome the continued effective collaboration between Heathrow and energy operators as part of the review. My department and the Department for Transport will work to ensure that that collaboration continues across those critical sectors. Although such incidents are rare and the UK has a robust and resilient system, there are always wider lessons to be learned. The majority of recommendations made by NESO in its report suggest potential improvements that could be considered by operators across the energy sector. In collaboration with NESO, Ofgem and other industry partners, my department will ensure the delivery and implementation of those energy recommendations. However, the report findings are also applicable to wider government policy on resilience, both in the energy sector and across other critical national infrastructure sectors. Ensuring the protection and resilience of critical national infrastructure continues to be a key priority for government, with action already being taken. The Government’s recently published 10-year infra- structure strategy committed to strengthening resilience standards across critical national infrastructure. Further, the Cabinet Office will imminently publish the UK Government’s resilience action plan, which will articulate the Government’s new strategic approach to resilience and is the outcome of the resilience review announced by the Chancellor of the Duchy of Lancaster in this place last year. My department is already taking steps to enhance our current approach to the designation of critical national infrastructure in the energy sector. We recently introduced specific licence conditions that give NESO responsibility for data gathering and technical analysis to independently inform the Government’s decisions on the designation of CNI, ensuring our most critical infrastructure in the energy sector is always as resilient as possible. We will work with the Cabinet Office and wider government to develop a full response to the North Hyde report and set out how we will tackle some of the cross-sector resilience challenges highlighted, particularly given the importance of the energy sector for the continued operation of so much of our critical national infrastructure. I want to restate that Great Britain continues to have a resilient energy network. Even though incidents such as this are rare, it is essential that we learn the lessons to maintain and, where possible, improve our resilience. The government response will set out our plans for how we will continue to do so. I thank NESO for carrying out such a comprehensive review over the past three months. The report shows the value of learning from past emergencies such as this. NESO’s newly established functions in energy resilience will enable government, the energy industry and the regulator to truly understand whole energy system risks and mitigations, proactively ensuring that Great Britain continues to have a reliable energy supply, which is critical to the whole of society. I commend this Statement to the House”.

19:49:00

My Lords, I thank the Minister for repeating the Statement. I also thank NESO for its swift and diligent work. The findings of the report are deeply concerning. It is clear, as the Minister said, that National Grid failed to address a known issue for over seven years—a failure that is simply inexcusable. The central lesson from the Heathrow blackout is the vital role that critical national infrastructure plays in ensuring both our energy security and our national security. Shortly after the incident at Heathrow, events in Spain and Portugal served as a stark warning of what can happen when energy systems are left vulnerable. Public transport was brought to a standstill, payment systems collapsed, and millions were left unable to cook, travel or contact their loved ones. In the case of North Hyde, the blackout disrupted schools, the London Underground and Hillingdon Hospital, and affected nearly 70,000 customers, some of whom were forced to leave their homes. That is the very real cost of neglecting our energy resilience. Let us be clear: this Government are jeopardising our energy security. We are deeply fortunate to be a country surrounded by our own gas fields, yet instead of using these domestic resources, the Government have chosen to rely on imports, including gas imported from the very same North Sea fields that they are barring Britain from accessing. We are seeing gas wells filled with concrete, contingency options dismissed and our energy independence systematically dismantled. In the light of growing geopolitical instability, what steps will the Government take to strengthen the resilience of our energy infrastructure? What assessment has been made of how our current energy targets increase our reliance on Chinese imports? Just last year, our intelligence services warned of Chinese state-backed cyber operations aimed at disrupting critical infrastructure in the event of conflict. At the same time, the Government are racing to tie our energy future to Chinese technology, from solar panels and rare earths to batteries. We have already witnessed China restrict the export of key minerals in its trade dispute with the United States. We have seen reports of kill switches in Chinese-manufactured inverters, and US intelligence has flagged the potential presence of surveillance devices in Chinese wind turbines. Why are we, in effect, handing over the keys to our energy future to the Chinese? I turn to the findings of the report. Will the Minister confirm who at National Grid made the decision to delay critical maintenance on the transformer in 2022 and how they will be held accountable? What are the penalties for breaching licence conditions, and what enforcement mechanisms will be used? The report, as the Minister said, reveals that the North Hyde site failed to meet modern standards for physical barriers between transformers. Can the Minister confirm whether the Government have instructed National Grid to review all substations with older transformers that predate current safety requirements? Finally, with global tensions rising and the risk to infrastructure increasing, what are the Government doing to ensure the long-term resilience of our energy system? We want a clean energy future, one powered by nuclear, small modular reactors and the next wave of British innovation, but above all we need energy that is secure, affordable and reliable. This Government are making us increasingly dependent on foreign imports, all the while turning their back on British resources. I urge the Minister to return to this House with a clear plan for safeguarding the resilience and sovereignty of the UK’s energy supply.

My Lords, we are very grateful to NESO for the final report on this catastrophic power failure that shut down Heathrow, and we note the deeply concerning findings. A single point of failure detected years ago should not have been able to shut down our largest airport. This was a major incident. Heathrow closed for 16 hours; 1,300 flights were cancelled, impacting 270,000 passengers; and 70,000 domestic users had their energy cut. This presents a valuable learning opportunity, so I thank the Government for the terms of reference and NESO for its excellent and comprehensive report. The quality of the work here shows just how well NESO is establishing itself as a new organisation and how it is adding value. To summarise, the report found critical maintenance not done for seven years; older transformers in situ not compliant with modern regulations, allowing the fire to spread; any number of possible further unknown maintenance issues; and possible National Grid licence breaches. Heathrow has three independent feeds from the grid but has configured its internal network in such a way that losing just one feed closed the airport. National Grid, in turn, was not aware of Heathrow’s vulnerability and that it was critical national infrastructure. Broken systems and poor communications between organisations come on top of years of underinvestment, both in our grid infrastructure and in our critical national resilience more generally. These findings are particularly concerning as they come just before the massive period of transition, as we are about to invest over £70 billion before 2030 in achieving clean power. We also face increasing impacts from climate change itself and increasing external threats, from cyberattacks to attacks on our undersea cables, further impacting our national resilience. The report reveals a catalogue of serious failings, the most damaging of which was a catastrophic failure to recognise the imminent fault in the transformer in 2018, the failure to take appropriate action, and further mis-maintenance in 2022. This led directly to the fire. The substation, built in 1968, would have worked well had it been maintained, but it was not positioned in a way that met with modern design standards, which meant that once the fire started, it spread. The Minister in the other place said that National Grid would look at maintenance backlogs and that he hoped to get an update by the end of last week, so I ask the Minister: are the Government clearer on the scale of any further maintenance backlogs that exist? Heathrow understood its power supply vulnerability yet deemed it low-risk and decided not to do anything about it. What is the Government’s position on this continuing vulnerability at Heathrow Airport? The Minister talked about an opportunity for Heathrow to fix its systems, but surely the Government need to go further before we expand Heathrow, and make sure that Heathrow’s power systems are fit for purpose. Alarmingly, the energy system operators, including National Grid, were not aware that Heathrow was critical national infrastructure and did not understand the impacts of the interruption to one of its power supply points. This lack of joined-up thinking and awareness across critical sectors is a grave concern, so I hope that the Government will ensure that energy network operators are fully aware of all the critical national infrastructure customers that they have and the impacts of potential supply operations. Will a mandatory cross-sector communication and operation protocol be established to help resolve these problems? The critical national infrastructure people and the power supply people need to be talking to each other. That this really has to be resolved is one of the key things to come out of this. Further, what concrete steps will the Government take to mandate a comprehensive review of all the substations to make sure that they fit modern design standards and are sited appropriately? I know the Minister is in conversations with National Grid and with Ofgem. I welcome the commitments in the Statement before us today, but when do the Government expect the Ofgem report to be published, and how will the Minister and the Government further update this House once that has been completed? If further National Grid failures come to light, how will those be resolved, and how will National Grid be held to account if further backlogs of maintenance come to light? I welcome the inclusion of transformers. I note that there is a 12- to 24-month wait for these things. They are crucial to our transition to net zero, so I welcome that that was done. I call on the Government to do more to update Parliament on the transition to net zero and to produce an annual report on our energy resilience and our transition to net zero. Finally, this is a valuable learning opportunity, but for the Government to learn, this report needs to not sit on a shelf. We have had other reports about energy resilience, and we have had Mighty Oak, so can the Minister reassure me about the actions the Government will take to ensure that lessons are learned and actions are taken, across the sectors, to improve communication and improve our resilience? We all know that if this stuff goes wrong, the lights go out for everybody and that causes problems, so we do need to act on these things, but I thank the Minister for repeating the Statement.

I thank noble Lords for their questions and comments. We have never had a blackout in this country in the lifetime of the national grid. We are very proud of the resilience of the grid. We had this incident at Heathrow, but the number of problems like that is very small, and we are going to learn from those mistakes. The noble Earl asked whether anybody will be punished for this. It is the responsibility of Ofgem, the independent energy regulator, to determine whether the national grid was in breach of any of its licence conditions and to take appropriate action. Based on NESO’s findings, Ofgem is opening an official enforcement investigation into the grid to consider any possible licence breaches relating to the development and maintenance of the electricity system at North Hyde. We are on to that and will report back once we know where we are. I do not have the figures on the maintenance backlog, but I will write to the noble Earl with whatever information we have. There will be an audit of the other substations as part of this review, especially those that date back to 1968, to see whether they are still suitable for the task they have to do. There were questions about long-term resilience. I mentioned that a resilience statement on critical infra-structure was made today. We take this very seriously. I think this country is a world leader in delivering the development of the critical national infrastructure knowledge base and the UK Government have a world-leading tool that creates an interactive map of all CNI in the UK. This helps the UK Government understand vulnerabilities over the 13 CNI sectors, which include energy, water, nuclear, the chemical industry, et cetera. We are taking this very seriously, not just as a Government but across the nations and across every department. We need to get this right. Whenever anything like what happened at Heathrow happens, we need to learn from it. There were a couple of general points about net zero, energy security and China. On China, I understand the noble Earl’s comments, but foreign involvement in critical national infrastructure undergoes the highest levels of scrutiny. My department works across government to monitor and guard against any potential security risks in the energy sector and its supply chain. The integrated review refresh talked about having a positive trading relationship between the UK and China and we continue to recognise the importance of trade and investment with China. We are investing £300 million into the supply chain on solar panels, which the noble Earl mentioned, and the turbines we use in this country are manufactured in the West, not in China. As a general point on energy security, I would have thought that the best way to achieve it is surely to have home-grown energy. That is why it is important that we go ahead and achieve net zero and try to achieve clean energy by 2030, to make sure that we are not reliant on international markets and fluctuating oil and gas prices but can rely on something home-grown that we know will be there for the country.

20:04:00

Sitting suspended.