National Grid (LON:NG) has submitted its final business plans to Ofgem for its UK Electricity and Gas Transmission businesses, as well as the Electricity System Operator, for the 2021-2026 RIIO-2 period. These plans have been developed following extensive engagement with customers, industry stakeholders, non-domestic consumers and households across the country.
Our Electricity Transmission plan has a baseline totex spend of £7.1bn over the five years. It assumes connection of 15.3GW of customer capacity, providing the UK with clean power and flexible storage, as well as continued investment to maintain reliability and resilience. Our Gas Transmission plan has a baseline totex spend of £2.8bn over the five year plan. It assumes an increase in asset health and cyber related investment, as well as a programme of work needed to test and prove hydrogen conversion options. The baseline spend, under our financial framework, would see consumer bills reduced slightly in real terms for both Electricity and Gas Transmission.
The plans include the financial framework that we believe will be necessary to incentivise the investment required to maintain and build the flexible grids of the future. We provide more evidence to demonstrate why we believe a real 6.5% (CPI stripped) allowed cost of equity is the right level to deliver this in RIIO-2. With a growing societal focus on the speed of decarbonisation and the challenges in meeting the UK’s 2050 net zero emissions target, the plans provide options for additional anticipatory investment to facilitate additional wind generation and develop a national EV rapid charging network.
This is an exciting time for the energy industry, and we remain committed to delivering and maintaining world class networks that provide the means to lower carbon emissions, and to meeting net zero targets, that will be to the benefit of all consumers. We look forward to engaging further with all our stakeholders as we explain and debate our plans, including through the open forums in March and April 2020, ahead of initial determinations from Ofgem in summer 2020, and final determinations in late 2020.
For additional information, please follow this link to the RIIO-2 section of National Grid’s investor website.