National Grid Case Study: Driving Sustainability Targets with Decision Analytics
For more than two decades, the world has come together each year at the UN Climate Change Conference of the Parties (COP) to negotiate a coordinated response to climate change. National Grid is a principal partner at this year’s COP26, taking place in Glasgow in November.
COP26 and Net Zero
Since the Paris Agreement was reached at COP21 in 2015, COPs have mainly focused on the details of implementation and ramping up nations’ ambition on climate action. The ’Ratchet Mechanism‘ is a key component of the 2015 Paris Agreement (COP21), requiring countries to submit increasingly ambitious climate goals every five years. After being delayed for a year due to the pandemic, COP26 will be the first meeting with enhanced commitments to turn the tide on climate change—it is considered the most significant event for global climate action in the last six years.
The four key goals of COP26 are to:
- Secure global net zero by mid-century and limit global temperature rises to 1.5 degrees
- Adapt to protect communities and natural habitats
- Mobilize finance (at least $100 billion USD in climate finance per year)
- Work together to deliver action to tackle the climate crisis
The Defining Challenge of this Generation
Tackling climate change is the biggest challenge facing our generation. National Grid’s Responsible Business Charter 2020 lays out the company’s commitment to achieving net zero carbon emissions by 2050—not just in delivering energy to millions of homes and businesses in the UK and the northeastern U.S., but also in its own operations.
National Grid is playing a vital role in transforming its electricity and natural gas networks with smarter, cleaner and more resilient energy solutions to meet the goal of reducing greenhouse gas emissions. And National Grid Partners (NGP) is playing a big part in this.
NGP is the leading corporate-backed investment and innovation fund in the utility industry. Its charter is simple: get there faster. Get to decarbonization faster. Create more efficient infrastructures faster. Develop innovative ideas faster—and share them across the industry. NGP is doing so, and successfully, in two areas you should know about: investing in strategic startups and serving as a trusted voice to other energy utilities and new clean-energy investors.
In line with these goals, National Grid set its focus on 10 key areas in the U.S. to get the organization to net zero by 2050, including:
- Reducing demand through energy efficiency and demand response
- Decarbonizing the gas network with renewable natural gas and hydrogen
- Reducing methane emissions from the gas network while working with the industry to reduce emissions through the entire value chain
- Integrating innovative technologies to decarbonize heat
- Interconnecting large-scale renewables with a 21st century grid
- Enabling and optimizing distributed generation
- Utilizing storage
- Eliminating Sulphur hexafluoride (SF6) greenhouse gas emissions
- Advancing clean transportation
- Investing in large-scale carbon management
Setting ambitious climate goals involves undertaking an analysis of an organization’s contributions to climate change and a feasibility study to determine if meeting these goals is possible. However, an organization’s agreement on a feasible strategy isn’t the same as a concrete plan. A company can commit to a series of projects that achieve sustainability goals, but inevitably it will face tough decisions as urgent, competing needs arise. A key element of a robust sustainability strategy is a decision-making process that balances sustainability against the rest of the organization’s priorities.
National Grid’s integration of the Copperleaf® Decision Analytics Solution to manage its investment decision-making process is one such example.
National Grid relies on Copperleaf to make the best infrastructure investment decisions that incorporate a wide range of strategic and operational factors.
Chief Technology & Innovation Officer, National Grid
Founder & President, National Grid Partners
National Grid and Copperleaf Decision Analytics
NGP invests in companies that can be strategically impactful to its business, are growing quickly and have strong financial prospects. National Grid, like any company, has a limited amount of capital to plan and optimize its capital investments. Copperleaf, with a strong team led by Judi Hess, has grown into an industry leader in asset management decision analytics—software that’s critical to helping utilities like National Grid make sure the money they can invest generates the most good for customers using software that optimizes the company’s capital plans.
“National Grid relies on Copperleaf to make the best infrastructure investment decisions that incorporate a wide range of strategic and operational factors,” said Lisa Lambert, Chief Technology and Innovation Officer at National Grid and president and founder of National Grid Partners. “Copperleaf aligns perfectly with NGP’s mandate to invest in market-leading companies that are disrupting the energy industry.”
How it Works
Copperleaf helps make net zero real. Its software can help National Grid and other utilities prioritize the infrastructure investments needed to make energy safe, reliable and carbon free.
Models within our solution calculate the value of potential projects in terms of mitigating risk exposed to the organization (for example, by replacing aging infrastructure), but also in terms of the benefits earned.
In some cases, these benefits take the form of cost efficiency, while in others the benefits may be increased service reliability or a reduction in greenhouse gas emissions.
To illustrate this problem, imagine you work for a large power company with tight constraints around budget and resources, which needs to make decisions about the timing of three projects within the next five years:
- Installation of electric vehicle charging stations along major routes within your operating region
- Replacement of SF6-filled breakers and switches, which emit high levels of greenhouse gases, with cleaner alternatives
- Installation and connection of distributed solar power generation in your network
Each of these investments is clearly valuable and supports your sustainability strategy but deciding when to execute each project can be challenging. You might be able to assess the value and costs if you had the luxury of considering them in a vacuum, but you don’t—you have to weigh these decisions against every other dollar you spend. Your broader portfolio is mitigating risks from ageing infrastructure, storms, outages, and a long list of consequences you are accountable for avoiding as the operator of a large power company. To make matters more complicated, some communities are already struggling to pay their power bills, so continuing to provide reliable power in an equitable and affordable way is a necessity. How do you decide what you can afford to do, while building a budget for the future?
This is the problem Copperleaf helps solve. By building a decision-making process aligned to a sustainability strategy, a client like National Grid is able to prioritize and justify the value of executing projects that minimize the organization’s impact on the environment, while providing safe, reliable, and affordable service to its customers. Twenty years ago, planners were unable to understand or defend the value of sustainability projects against those that drove strictly financial benefits.
In the future, optimizing capital plans to achieve net zero as fast and cost effectively as possible will be critical to National Grid’s success as a company. Copperleaf is an ideal tool to help us do exactly that.
Chief Technology & Innovation Officer, National Grid and Founder & President, National Grid Partners
Today, Copperleaf’s value-based decision-making framework helps organizations like National Grid:
- Quantify the value of replacing or repairing specific assets to mitigate environmental risk
- Track the impact projects have on the environment and form plans that mitigate the impact
- Justify budgets to industry regulators by communicating the value of plans in terms of emissions reductions
Accountability for tracking and reaching the 2050 strategy has already begun, as National Grid marches toward a net zero future. Copperleaf’s software solutions will be a core tool the company utilizes to make its goal achievable. In the U.S., National Grid has specific target milestones:
- Double the amount of connected distributed solar systems in New York
- Interconnect a significant amount of offshore generation to the grid
- Double the amount of connected distributed solar systems in Massachusetts
- Build infrastructure that allows for 10 million electric vehicles on the roads in its U.S. territory
- Convert its entire passenger fleet to 100 percent electric
- Double the rate of energy efficiency retrofits
- Convert nearly all of the Northeast’s 5 million oil-heated buildings to cleaner solutions
2025 and Beyond
With 2025 around the corner, what is National Grid’s plan to achieve these goals? How does the company strike a balance between providing safe, affordable, and reliable service today, while investing appropriately to meet goals related to net zero and other COP26 commitments? How does it track progress toward achieving these targets in the short and long term? These are questions felt around the globe as organizations build ambitious targets and face the gargantuan challenge of executing realistic plans to meet them.
National Grid’s sustainability roadmap, with help from Copperleaf, will make these commitments a reality. For example, by modelling the value of energy efficient retrofits, National Grid can identify which projects contribute to yearly efficiency targets (and by how much). They can form plans that prioritize these projects while also managing the rest of its infrastructure responsibly. The company can start to answer questions like, “is it better to replace this ageing piece of equipment in the next year and build those retrofits the following year, or is it better to do it the other way around?”
Copperleaf is used now by most major businesses within National Grid to better plan capital investments. Capital project planning and execution are at the heart of infrastructure companies such as National Grid, allowing them to optimize projects and reduce expenses.
This is the new business-as-usual. Companies must start embedding sustainability into their ’planning DNA.’ As much as fiscal and resource constraints impact a plan’s feasibility, so too must carbon emissions, climate resiliency, and environmental impact. Without marrying sustainability to budget planning, organizations are hard-pressed to provide confidence to the public, investors, and industry regulators that ambitious climate targets are part of an attainable strategy to provide safe, reliable, and affordable service into the next few decades.
Lisa Lambert noted that, “In the future, optimizing capital plans to achieve net zero as fast and cost effectively as possible will be critical to National Grid’s success as a company. Copperleaf is an ideal tool to help us do exactly that.”
Learn more about our work with National Grid here.