Network operators, including National Grid, have revealed plans to spend £13.7 billion on gas and electricity transmission over a five-year period starting in 2021.
The figure represents the sum of their proposed baseline allowances for total expenditure over the second set of the RIIO price controls. The draft business plans are due to be submitted today (9 December) for all sectors except electricity distribution.
NGET
National Grid Electricity Transmission (NGET) has proposed a budget of £7.1 billion – or £1.4 billion per year. This incorporates more than £1 billion of savings from successful innovations and efficiencies, £707 million carried over from the current settlement period and £303 million which it plans to achieve in the future.
Nevertheless, annual spending on a comparable basis would be 18 per cent higher, primarily reflecting the rising age of the network and the growing threat from cyber attacks.
Accordingly, the company plans to spend nearly £4.3 billion replacing and upgrading its assets to maintain a safe and reliable network, plus £555 million protecting it from external threats.
It also plans to spend £936 million to facilitate decarbonisation of the electricity system by increasing network capacity by 22.5GW and £417 million connecting 15.3GW of new customer capacity.
Furthermore, the company has proposed to spend £255 million on communities and the environment, £84 million on innovation projects and £1 million on improving transparency.
Writing in the executive summary to the plan, NGET chair Nicola Shaw said: “We have carried out our largest ever engagement exercise with our customers, stakeholders and consumers for this business plan.
“You provided us with clear feedback on what is important to you: a reliable and resilient network that can support the changing energy system, while keeping bills low. You also want us to care more about the communities we work in and be more open in explaining our performance.”
She continued: “Our plan covers a crucial period when we all expect rapid change in the energy system to dramatically reduce carbon emissions to achieve the UK’s net-zero target by 2050. Our plan highlights specific opportunities within the regulatory framework, to enable and accelerate the UK’s progress to net zero.
“We are putting forward collaborative, innovative, and whole-system solutions to support policymakers. We are reinforcing this with commitments to reduce our own emissions to deliver the UK’s net-zero target and ensure no one is left behind in the energy transition.”
NGGT
Meanwhile, National Grid Gas Transmission (NGGT) has proposed a baseline totex allowance of £2.6 billion – or £553 million per year. This incorporates £780 million of efficiency savings, including £750 million carried over from the current settlement period.
But for the same reasons as electricity transmission, the annual budget is 39 per cent higher. NGGT has proposed to spend £1.4 billion replacing and upgrading its assets to maintain a safe reliable network and £590 million protecting from external threats.
The company plans to spend just £85 million on the decarbonisation of heat but £275 million on communities and the environment. It also plans to spend £15 million connecting customers to the network and £40 million enhancing its data-sharing capabilities.
Shaw, who is also the chair of NGGT, wrote in the foreword to its draft business plan: “Over time there will be changes in gas usage as we move to net zero. However, during the period of this plan, we don’t envisage substantial change to the network or what is required of it.
“Instead it will be a period of developing options and understanding choices for the future, and hence we are contributing to innovation projects with other organisations, such as investigating the future of hydrogen, testing the capability of the network to transport hydrogen, and enabling broader use of biomethane.”
SSEN
Scottish and Southern Electricity Networks (SSEN) has proposed a baseline spending allowance of almost £2.4 billion for its transmission business. Of this, £927 million would be used to replace or upgrade existing assets, £891 million would be invested in new capacity to enable the decarbonisation of the power grid and £330 million would be spent to maintain the security of supplies.
Rob McDonald, managing director of SSEN Transmission, said: “With our network region home to some of the UK’s greatest resources of renewable energy we have a critical role to play in the fight to prevent the worst effects of climate change, connecting up more renewable energy and transporting it across the country.
“We believe our business plan represents a balanced package that makes a powerful case for the vital investment needed to deliver a pathway net zero. It will also lead to improved network reliability, at an affordable cost to consumers, whilst also providing a fair return to investors.”
SPEN
SP Energy Networks has proposed as baseline allowance for its transmission arm of £1.6 billion, with £524 million allocated to replacing and upgrading existing assets, £540 million to increasing the capacity of the network and £292 million to maintaining the security of supplies.