National Grid SWOT and PESTLE Analysis

Strength

1. Portfolio of high-quality assets, core regulated businesses and commercial energy businesses in US and UK: National Grid owns a range of high-quality, long-term assets that share low commercial risk profiles and are typically supported by long-term contracts or stable regulatory arrangements. The company’s core regulated businesses in the UK and US generated over 90% of the operating profits. The company also owns a diverse and growing portfolio of commercial energy businesses across the UK and US, which support the core regulated businesses. These businesses include Grain LNG terminal and electricity interconnectors between the UK and continental Europe, which generate revenue by selling capacity to store or transmit energy. The company’s UK metering business generates revenue primarily through meter rentals. The company also develops and sells surplus land through its commercial property business. The company’s UK electricity business consists of an Electricity System Operator and electricity transmission network. The UK gas transmission business consists of gas transmission assets and an integrated gas system operator. In the US, National Grid owns and operates transmission facilities in New Hampshire, New York, Rhode Island, Massachusetts and Vermont. The company also owns gas distribution networks across north-eastern US.

2. Leading the clean energy transition: There is a rising demand for transition to clean energy over concerns about climate change. There are climate change protests around the world and increased commitment from governments to take action, including in the geographies where National Grid operates. UK, New York and Massachusetts aim to achieve net zero emissions by 2050. Rhode Island has set a target to reduce carbon emissions by 80% by 2050. In the midst of these developments, National Grid has evolved its strategy and vision to reflect the company’s belief in ensuring clean transition. As part of the new strategy, there were various initiatives taken by the company. The company worked with the UK government to boost the transition to electric vehicles through a 500 million pounds commitment in the 2020 budget to support the roll out of rapid charging hubs across the country. The world’s first zero carbon industrial cluster is being developed in UK.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Reducing greenhouse gas emissions to combat climate change: National Grid takes steps to reduce GHG emissions, which help in combating climate change as well as in reducing costs. The company is facilitating the move to a low carbon network through support of all related fuel types and technologies like wind and solar. The target is to reduce GHG emissions by 80% by 2050. The company has already achieved the 2020 target of 45% through modernisation of infrastructure, innovative ways of carbon reduction across operational assets and energy management in office buildings. In UK, the company began including carbon as part of the investment decision making process which means taking into account the lifetime carbon impact of projects while making major investment decisions. Carbon weighting is included in the tender award criteria for incentivising suppliers who reduce emissions.

2. Promoting circular economy and responsible resource use: Non-renewable resources like steel and aluminium are required for energy companies in order to build and maintain energy networks. The rising population leads to rising demand for these resources which negatively impacts the environment, makes it harder to source them and leads to price volatility. This makes it necessary for companies to make the most of the materials. National Grid supports circular economy principles that aim to maximise material value through design of assets that can be recycled and reused. Suppliers are encouraged to make assets designed for disassembly, repair and reuse. Refurbishment centres In US and UK help the company in extending the life of materials. Employees are sensitised about responsible resource use and encouraged to spread the message among society through behavioural change campaigns.