National Grid drops Beijing-backed supplier over UK power network fears

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National Grid has started removing components supplied by a Chinese state-backed company from Britain’s electricity transmission network over cyber security fears, according to two people familiar with the matter.

The move by the FTSE 100 company, which runs the bulk of Britain’s electricity grid, came after it sought advice from the National Cyber Security Centre, a branch of signals intelligence agency GCHQ, said one of the people, a Whitehall official.

National Grid’s decision to terminate its contracts with a UK subsidiary of China’s Nari Technology in April and begin removing components has followed a broader rethink in the west in recent years about Chinese involvement in critical national infrastructure.

National Grid declined to comment on its previous relationship with NR Electric UK, citing commercial confidentiality, but said it “take[s] the security of its infrastructure very seriously”.

“[We] have effective controls in place to protect our employees and critical assets to ensure we can continue to reliably, safely and securely transmit electricity,” the company added.

Nari Technology did not respond to requests for comment. Based in Nanjing, the state-controlled company is a big supplier of components that help manage and improve the performance of electricity grids.

The £18bn company is listed on the Shanghai Stock Exchange, with 51.48 per cent of its shares owned by the Nari Group, according to Bloomberg. Nari Group is part of China’s state-owned grid company, the world’s biggest electricity infrastructure group.

The second person familiar with National Grid’s decision said the cyber security concerns centred on NR Electric UK components that help control and balance Britain’s electricity grid and minimise the risk of blackouts.

The components are used to automate how energy projects and the grid “talk to each other”, the person said.

In its 2022 accounts NR Electric UK said it was informed in April 2023 “by their main customer, National Grid, of their decision to discontinue their current business contracts with them”.

An employee at NR Electric UK said National Grid did not disclose a reason for terminating the contracts and said the company no longer had access to sites where the components were installed.

The employee added that NR Electric UK had discussed cyber security issues with National Grid in the past and “we didn’t see any problem”. Engineers had run tests and “we didn’t see any potential risk”, they added.

It is unclear whether the components are still present in the electricity transmission network.

Accounts for NR Electric UK indicate it has a limited presence in the UK, filing small company accounts that show net assets of £2.5mn in 2022.

The NR Electric UK employee said the company had worked on about 15 sites in England and Wales.

National Grid’s move is the latest sign of sensitivity about the role of Chinese companies in core British infrastructure.

In 2022 the government twice intervened to restrict Chinese companies’ involvement in Britain’s electricity grid, using powers under the National Security and Investment Act. 

The UK in 2020 also banned Huawei equipment from the 5G network after pressure from the US.

Last year, the government bought out China’s state-owned China General Nuclear from the planned Sizewell C nuclear power plant under development by EDF. The government paid about £100mn. 

A government official said: “The UK takes its national security extremely seriously, including the security of its critical infrastructure and all sectors of the economy.”

“We work closely with the private sector to safeguard our national security,” they added.

The Department for Energy Security and Net Zero said it did not comment on individual business decisions taken by private organisations.

The Chinese embassy in London said it was not aware of National Grid’s decision, but said that as a principle and long-held position it always opposed moves to “push for decoupling and severing of supply chains under the pretext of security”.

The embassy added: “The China-UK practical co-operation is a win-win one that brings benefits to both sides, and the two countries should make joint efforts to create conducive environment to it.”

Additional reporting by Edward White