Federal backing 'super important' to US climate goals – National Grid president

➤ Fed support of infrastructure buildout 'super important' to energy transition

➤ Sector must make 'anticipatory investments' in transmission ahead of renewables

➤ Decarbonization comes with a cost, but so does inaction

London-headquartered utility holding company National Grid PLC's U.S. president, Badar Khan, is more optimistic about the global response to climate change as the corporate world begins to take on a more active role, though he also sees challenges ahead.

National Grid targets net-zero emissions by 2050 through efforts including increasing renewable energy, boosting the deployment of electric vehicles, and targeting the decarbonization of heating services. The company's U.S. subsidiary, known as National Grid USA, serves electricity and natural gas customers in Massachusetts, New York and Rhode Island, though the Rhode Island utility is being sold.

S&P Global Market Intelligence spoke with National Grid US President Badar Khan about the challenges posed by energy transition issues heading into 2022, particularly in the U.S. Northeast. The following conversation has been edited for clarity and length. The full interview is featured as an episode on the Energy Evolution podcast available below, or through Apple, Spotify and other platforms.

S&P Global Market Intelligence: How do you think the COP26 international climate talks are going to impact what we see happen in 2022?

Badar Khan: I came out more optimistic than I was when I went into COP26. I kept bumping into people for whom it was also their first COP, and all these people were C-suite business executives and a whole bunch of finance executives. That's what made me optimistic. I think the overall outcome may not have been as strong as some people had hoped, but I do think it represents a big step forward.

The other area that I think that I was really pleased to see while I was there, and I think we'll continue to see that over the course of this year, is the concept of ensuring there's equity or fairness in this transition.

Can you tell us more about what you are expecting to see from U.S. climate infrastructure legislation in 2022?

Federal support for infrastructure is super important to mitigate the impacts of climate change. If we have any hope of meeting our emissions reduction goals, in terms of what I expect to see from it, I think there are four or five areas.

One is modernizing the grid, so investing in technology to optimize and increase grid utilization to accommodate all the distributed resources. Second is resilience. We're seeing more and more storms, and we're seeing the impact of those storms. I expect to see funding and investment in the resilience of the networks. Third is investment for connecting new supply. Clearly, we need to decarbonize our energy supply. The big issue here is we're going to be building renewable generation where there aren't people and so we're going to need transmission to connect that. Fourth is investment for charging infrastructure. Lastly is [research, development and demonstration]. Whether it's green hydrogen, long-duration storage or carbon capture.

What are some of the biggest hurdles that you see to meeting National Grid's net-zero emissions by 2025 goal and what are some solutions?

In terms of energy supply, we're talking about getting to at least 80% renewable energy supply by 2030. In terms of challenges and solutions, getting renewable energy supply connected to load will require significant transmission to get built. Because the lead times for transmission can often be longer than lead times for generation, we're going to need to be thinking through and allowing for what we call anticipatory investments.

Being able to get some of this transmission built isn't just about the money and the funding, it's also about the permitting. We continue to see challenges getting transmission infrastructure, actually, all infrastructure, permitted.

For decarbonizing transport, we need to get vehicles on the road, but vehicles need to get charged. So, we've got a chicken or egg issue. Utilities are stepping up and providing a solution where the market isn't working. But at some point, we need the market to step in.

Then for building heat, I think that's the toughest sector to crack. You know, when I think about these three sectors, we're already at parity, on energy supply between renewables and gas-fired generation, even for transportation, electric vehicles, the total cost of ownership is increasingly at parity with gasoline-powered vehicles. But I think for building heat, we're not there. Gas is the cheapest form of heating. But over the next decade, we've got to convert customers away from gas, whether that's electrifying their heating or getting customers off oil-heated buildings.

What do you say to the consumer that says, "Okay, but what is this going to cost me?"

I think that cost is going to be more visible. It'll show up in terms of investment that'll show up in people's energy bills. I think it'll show up with the federal infrastructure funding and in their taxes.

It's important to also understand that there will be costs that we will no longer incur. These are less visible. They will happen over time.

We know we're experiencing higher and higher storm costs. If we get this right, the costs of more frequent and more devastating storms, weather events, should go down. Health care costs, if we've got cleaner air, should go down over time. These things are not as visible, they're harder to track and they will continue to rise if we do nothing.

National Grid Partners, is a $400 million corporate venture capital innovation program. What is that program and what advice would you pass along to other private entities that are out there looking to invest in climate change solutions?

When I first joined National Grid a few years ago, we said, look, we needed to understand what's coming around the corner. We didn't need to just understand it, but we wanted to be able to support it.

We're making minority investments in energy and technology entrepreneurs. We've deployed about three-quarters of that, so close to $300 million in about 35 different investments, everything from [artificial intelligence] and analytics, [Internet of Things], smart grid, grid optimization, cybersecurity, to kind of helping customers manage their own energy.

In terms of advice for people looking to invest. I think there's a ton of activity clearly in the venture space. You need to focus on the team, their track record. Does whatever they're offering really solve a need and in a significant way?