National Grid sets out RIIO2 spending plans
National Grid will spend £7.4 billion on electricity transmission over the RIIO2 price control period, according to figures unveiled in its draft business plan which has been submitted to Ofgem's RIIO2 Challenge Group.
5th July 2019 by Networks
The firm has proposed spending of almost £4.6bn to maintain and upgrade the existing network.
It has proposed to spend another £752 million reinforcing the power grid to deliver additional capacity and £479m connecting new assets to the network.
National Grid will also invest at least £620m to protect the network from cyber-attacks, physical attacks and extreme weather. £226m will be spent to reduce its environmental impact and £121m on driving forward an innovation programme.
National Grid has also unveiled its draft business plan for gas transmission.
Amongst the total of £3bn that it is proposing to spend, £890m will be spent on maintaining the existing network, £615m protecting it from external threats and £255m 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 National Grid believes is an appropriate level.
National Grid’s head of regulatory finance Darren Pettifer recently told Network that a 5.5% cost of equity would be a fairer reflection of the risks being managed and enable the behaviours and investment required to modernise GB’s energy system.
Ofgem recently suggested that it will be nearer to 4.3% – almost 50% lower than under the previous price control (RIIO1) and the lowest ever capital rate for energy network companies.
The five-year RIIO2 settlement period will begin in 2023 for electricity distribution and 2021 for all other sectors.
You can see the draft business plan for electricity transmisison here and the one for gas here.
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