National Grid has unveiled preliminary proposals to spend £10.4 billion over the RIIO2 price control period – £7.4 billion on electricity transmission and £3 billion on gas transmission.
The firm has submitted its draft business plans to Ofgem’s RIIO2 Challenge Group for consideration by the panel of industry experts.
With regards to electricity transmission, National Grid has pencilled in spending of almost £4.6 billion to maintain and upgrade the existing network. It has proposed to spend another £752 million reinforcing the power grid to deliver 20.3GW of additional capacity and £479 million connecting 17.3GW of assets to the network, including 12.6GW of low-carbon generation.
It also expects to invest £620 million in protecting the power grid from external threats such as cyber-attacks and extreme weather, £226 million to reduce its environmental impact and £121 million to drive forward innovation.
On the gas transmission side, National Grid has proposed to spend £890 million maintaining the existing network, £615 million protecting it from external threats and £255 million ensuring its compressors comply with EU emissions limits.
A spokesperson for National Grid said: “There will be a rapid change in our energy systems over the next 10 years as we work to reduce carbon emissions significantly and maintain reliable and efficient networks.
“Significant investment will be required and our draft plans detail where our customers, businesses, domestic consumers and policy makers are telling us this investment is needed. We are confident that through innovation and efficiencies we can deliver this baseline investment without increasing our share of the bill for consumers”
“The draft plans have been sent to stakeholders for feedback and we’ll refine them over the course of 2019 before submitting final business plans to Ofgem in December”.
The plans assume a cost of equity of 5.5 per cent, which the company believes is an appropriate level. This is despite Ofgem suggesting it will be nearer 4.3 per cent, down from an equivalent range of 7 to 8 per cent for the current price controls.
The five-year RIIO2 settlement period will begin in 2023 for electricity distribution and 2021 for all other sectors.
Last week, SSEN proposed to invest at least £2.2 billion as part of its RIIO2 business plan for electricity transmission.