IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceBuildingaGBelectricitynetworkreadyfornetzeroIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceContentsIntroductiontothechallengeahead91.Lowvoltagedistribution:preparingforawaveofconsumerelectrification2.Transmission-distributioninterface:connectingonshorerenewablesandstorage3.Transmission:connectingoffshoreandlarge-scalegeneration162432Investmenttogetthere39Glossary46Appendix47Executivesummary3HomeReturntothebeginningofthedocument.GlossaryDefinitionsofenergysystemtermsandadditionalbackgroundinformation.ArrowsClickforwardandbackwardsthroughthedocument.SectionsClickonthetitlesinthemargintonavigatetodifferentsectionsinthereport.IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceExecutivesummaryTransformingthegridiscriticaltotheUK’senergygoalsThisreportsetsout•thescaleofthechallengetoupgradeournetworks•theinitiativesunderway•thekeyprioritiestoensurenetworkinfrastructureisnotabarriertonetzeroAchievingnetzeromeansourelectricitynetworkconnectinggigawattsofnewrenewablegenerationandpoweringmillionsofelectricvehiclesandheatpumpsacrossthecountry.InrecentmonthstheimportanceofthegridhascomeintofocusaspolicymakershaverecognisedthatourenergynetworksarecriticalinfrastructurefortheUK’senergygoals.Thegridisnotbroken.Wehavesuccessfullyconnectedmanygigawattsofwindfarms,solarfarmsandbatteries,andthereisalargepipelineoflowcarbonprojectsindevelopmentwithgridconnectionagreements.However,reformandinvestmentareurgentlyneeded.Leadtimesforcriticalnewlowcarbonprojectstoconnectarenowover15years.Wehavedeliveredrapidgrowthofelectricitysysteminfrastructurebefore-between1950and1975,electricitygenerationandgridcapacityincreasedalmostfive-fold.However,transformingthegridrequiresaclearstrategyandfocusondelivery.Thekeyplayers–Government,Ofgem,theElectricitySystemOperatorandthenetworkoperators–haverecognisedthechallengeandsetoutactionplans.Theseinitiativesprovideaspringboardforaction.Thekeymessageofthisreportisthatanetzeroreadygridisachievable.Theprioritynowismovingfromactionplanstodeliveringreformandinvestmentatpace.3IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface41.1NetworksmustinvestaheadofincreasingdemandNetworkoperatorshavedevelopedplansandinitiativestoensurepeoplecanconnect.However,theyneedtostepupthepaceofchangeinstrategicplanning,digitalisationanddevelopmentoftheirsupplychain.1.2OfgemmustprovidestrategicleadershiptoenablenetzeroTheregulatorhastakenagamblewithnetzerobycuttingdistributionnetworkinvestmentplansagainstdraftbudgets.Theymustensurethattheregulatoryframeworkenablesnetworkstoinveststrategicallyfornetzero.1.3GovernmentshouldcommittoelectrifyingheatandtransportItisincreasinglyclearfromtheevidencethathydrogenwillplayalimitedroleinhomeheating.However,untilthegovernmentmakesacleardecision,itisdifficultfornetworkstofullyplanandinvestfortheelectrificationofheatingthroughheatpumps.Thetransitiontonetzerowillcreateawaveofconsumerelectrificationaspeopleswitchtoelectricvehiclesandheatpumps,thepowerforwhichwillflowthroughthelow-voltagepartofthegrid.Upgradingthelow-voltagenetworkstoprepareforthisincreaseinelectricitydemandpresentsamajorchallenge.Withoutsufficientinvestment,theheadroomfornewconnectionsatstreetlevelwillrunout.Networkoperatorsunderstandthescaleofthechallengeofconsumerelectrification.Theyhavenewbusinessplansfor2023-2028withstrategicplans,innovationandincreasedinvestment.However,thepaceofinvestmentandinnovationisnotyetfastenough.Asustainedcommitmentfromthegovernment,Ofgemandnetworkcompanieswillbenecessarytoensurethatconsumersupanddownthecountrycanconnecttheirelectriccarchargersandinstalltheirheatpumpsquicklyandeasily.Lowvoltagedistribution:preparingforawaveofconsumerelectrificationRecommendationsReadyingthenetworksforheatandtransportelectrificationrequiresaclearplanandinvestment4IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface2.1DeliveroninvestmentaheadofneedMovingtoagridinvestmentregimethatdeliversgriddevelopmentsincoordinationwithandaheadofnewgenerationconnectionsiscritical.ThegovernmentandOfgemmustdeliverontheirproposalfor“InvestandConnect”andensurethenewFutureSystemOperatorisupandrunningtoleadaclearplanforgridinvestment.2.2ReformtheconnectionsprocessConnectingthegigawattsofrenewablesandstorageneededfornetzerowillnotbepossiblewithoutdeliveringastreamlinedandeffectiveconnectionsprocess.TheESOandnetworkoperatorsmustmanagethequeueofprojectstoensurethoseabletoconnectarenotblockedandimplementasmarterconnectionsprocesstogetgigawattsofgenerationflowingontothegrid.2.3ReformtheapproachforinteractionbetweentransmissionanddistributionnetworksTheprocessforassessinghowprojectsconnectingatdistributionwillaffectthetransmissionnetworkisacriticalbarrierforconnectingnewgeneration.TheESOandDNOsneedtoputinplaceanewprocesstoresolvetransmissionbarrierstodistributionconnectionsresultinginlongqueuestoconnect.5RecommendationsConnectingalargevolumeofrenewablegenerationandstorageprojectsiscriticaltodecarbonisingthepowersystemby2035.Between180and220GWofgrid-connectedpowergenerationcapacitywillbeneededtoachievethis.Developersarebringingforwardstorageandrenewableprojectsatthescaleweneed,andthereisalargepipelineofprojectswithgridconnectionagreements.However,newprojectsarenowstuckbehindalongqueuewithtransmissionsystemconnectionleadtimesofover15years.Thesedelaysareamajorbarriertonetzero.Thegovernment,systemoperatorandnetworkshaveplanstospeedupconnectiontimelines–deliveringontheseisnowurgent.Transmission-distributioninterface:connectingonshorerenewablesandstorageEnding15-yearconnectionleadtimesiskeytonetzeroIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface3.1TheFutureSystemOperatorneedsacleartimelineandremitEstablishingtheFSOasapublicbodywitharemittooverseeaclearstrategicplanforthetransmissionnetworkisakeystep.ThegovernmentmustensuretheFSOisupandrunningassoonaspossiblewithaclearstrategicdirectiontodelivernetzeroandtheindependenceandcapacitytodeliver.3.2EnsurethesupplychainhassufficientcapacitytodeliverprojectsInvestmentintransmissionnetworksisgrowingrapidlyacrosstheglobe.Thegovernment,theFutureSystemOperatorandtransmissionnetworkoperatorsneedtoimplementaneffectivesupplychainplantoensurethattransmissionprojectsarenotdelayedbythesupplyofcriticalcomponentsorthecapacityofthesupplychaintodeliver.3.3SpeeduptheplanningandconsentingprocessThegovernmentneedstoissueanationalplanningpolicystatementontheimportanceofelectricitynetworkinfrastructure.Thisshouldensurethatnetzeroisgivenproperweightindecision-makingandthatcommunitybenefitsaredeliveredinareashostingcriticalenergyinfrastructure.6RecommendationsThegridwillmakeorbreakthegovernment’stargettodeploy50GWofoffshorewindby2030.Investmentintransmissioncapacityisfallingbehinddeployment,leadingtocostsofmanagingconstraintsofover£1bnin2022.OfgemhasadoptedamajorpolicyshiftbyenablingnetworkstoinveststrategicallybasedonaCentralisedStrategicNetworkPlan.Thechallengeisnowdeliveringthescaleofinvestmentrequired.ThegovernmentshouldfullyimplementtherecommendationsofNickWinser,theElectricityNetworksCommissioner,toensurenetworkplanningprocessesandsupplychainsarefitforpurposeforcriticaltransmissioninvestmentprojects.Transmission:connectingoffshoreandlarge-scalegenerationTransmissioninvestmentwillmakeorbreakthe50GWoffshorewindtargetIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface7Wholesystem:investmenttoachievethetransformationThegovernmentandOfgemestimatethat£170-210bnwillneedtobeinvestedinthegridby2050toachieveournetzeroandenergygoals.£70bnofthisisbaselineinvestment.Theextra£100-£140bnwillunlockmassivenetzeroandenergysecuritybenefitsforallofus.Significantgridinvestmentisrequired,butthiswilldelivervaluetohouseholds3035404550552020202520302035204020452050Averagenetworkcosts(£/MWh)NetZerohighdemandNetZerolowdemandBaselineSource:ElectricitynetworksstrategicframeworkAppendixIFigure13,DepartmentforEnergySecurityandNetZero.LowernetworkcostsperunitofelectricityBy2050electricitynetworkswillbeprovidingmorevaluetohouseholdsbydeliveringthepowerweneedtoheatourhomesandgetaround.Becauseofthis,thecostofthenetworkperunitofenergyweusecouldfalldespitetheextrainvestmentinthenetworkrequired.Anetenergyexporterby2040Bydoublingdownonhome-generatedrenewables,GreatBritaincouldturnitsnetenergyimportof725TWhtodayinto25TWhofnetexportby2040.LowercostelectricityforconsumersEvenbeforethefossilfuelpricecrisis,thecostofrenewableshadfallenbelowthatoffossilfuelgeneration.Fit-for-purposegridinfrastructureandanefficientmarketwillenablecustomerstobenefitfromthesecostsavings.Economicopportunityofthe21stcenturySecure,cleanenergywillprovideafoundationforoureconomy.Thegovernmentexpectsgreenindustrieswillcreate480,000jobsby2030.Asmoreelectricityflowsacrossthenetworks,investingfornetzerowillmeanlowernetworkcostsperunitIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceSummaryTherearechallengesacrossthegrid1.1Networksmustinvestaheadofincreasingdemand1.2Ofgemmustprovidestrategicleadershiptoenablenetzero1.3Governmentshouldcommittoelectrifyingheatandtransport2.1Deliveroninvestmentaheadofneed2.2Reformtheconnectionsprocess2.3Reformtheapproachforinteractionbetweentransmissionanddistributionnetworks3.1TheFutureSystemOperatorneedsacleartimelineandremit3.2Ensurethesupplychainhassufficientcapacitytodeliverprojects3.3Speeduptheplanningandconsentingprocess1.Lowvoltagedistribution:preparingforawaveofconsumerelectrification2.Transmission-distributioninterface:connectingonshorerenewablesandstorage3.Transmission:connectingoffshoreandlarge-scalegenerationRecommendationsNetworkCriticalchallengesKeyinitiativesUpgradingthelow-voltagenetworksformillionsofEVsandheatpumpsisamajorundertaking.Thecurrentnetworkregulatoryregimedoesnotprovidetheframeworktosupportthistransformation.Afailuretoinveststrategicallyingridcapacitymeansleadtimesforconnectinglargerenewableandstorageprojectsareover15years.•ShiftinOfgem’sinvestmentregimesogridcapacityisdevelopedreadyfornewlowcarbongenerationprojectstoconnect•ESO’sGBConnectionsReform•NewframeworkforAcceleratedStrategicTransmissionInvestment(ASTI)•CentralisedStrategicNetworkPlantobedevelopedbytheFutureSystemOperator(FSO),anewpublicbodyOfgemhasbeenslowtoapproveinvestmentinlargetransmissionprojects.Theseprojectsareinherentlychallengingwithlongleadtimes.•Ofgemisconsultingonanewregulatoryregime•Networksarecarryingoutstrategicreinforcementinformedbyfuturedemandmodellingandassetmonitoring8IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceElectricitynetworkinfrastructureiscriticaltonetzeroandenergysecurityTheUKgovernmenthascommittedtoachievingnetzerocarbonemissionsby2050andshiftingfromimportedfossilfuelstodomesticrenewables.By2035,thegovernmentaimstohavedecarbonisedtheUK’selectricitysystem.Gettingtonetzerowillincreaseelectricitydemandforheat,transportandindustrialactivities.Thisincreaseindemandwillbemetbygreaterdomesticpowergeneration,interconnectorsandenergystorage.Asaresult,generationcapacitywillincreasefromabout100GWto180-220GWin2035.Thereisahugepipelineofgenerationandstorageprojectswithagreementstoconnecttothegrid.However,afailuretoinveststrategicallymeansnetworkinfrastructureisnowasignificantbarriertoourpolicygoals.Thetimescaleforconnectinganewprojecttothetransmissionnetworkisnowtypicallyover15years.ThegovernmentandOfgemhaverecognisedthecriticalroleofelectricitynetworks,andextensivechangesinourapproachtonetworksareunderway.Thisreportaimstosetout•thescaleofthechallengetoupgradeournetworks•theinitiativesunderway•thekeyprioritiestoensurenetworkinfrastructureisnotabarriertonetzero020406080100120140160Emissions(MtCO2e)Emissionspathwaytoadecarbonisedpowersystemin2035Source:DepartmentforEnergySecurityandNetZero,NetZeroStrategy.9IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceNetzerorequiresapowersystemtransformationElectricitydemandwillnearlydoubleby2035Demandforelectricitywillincreaseasitreplacesfossilfuelsforheating,transportandindustrialprocesses.Whilstsomedecarbonisationpathwaysarestilltobedetermined,wealreadyknowwithhighconfidencethatheating,transportandindustrialdemandforelectricitywillincreasesubstantiallyby2035.Whilstelectricitydemandwillincrease,thehigherefficiencyofelectricvehiclesandheatpumpswillenableconsumerstotravelandhavewarmhomesusinglessenergyandsavingmoney.ElectricitydemandElectricitygeneration10Source:ESOFutureEnergyScenarios2022,ConsumerTransformationscenario.ResidentialCommercialIndustrial-10001002003004005006002023202520272029203120332035Annualelectricitydemand(TWh)ExportDemandmetbyelectricityimportIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface01002003004005006002023202520272029203120332035Annualgeneration(TWh)NuclearCCS,biomass&hydrogenSolarOffshorewindOnshorewindOtherrenewablesFossilfuelsAllnetzeropathwaysenvisageveryhighlevelsofrenewableelectricitygeneration.By2035,75-80%ofelectricitysupplywilllikelybesourcedfromrenewables.Resiliencewillbeprovidedbytechnologicalandgeographicaldiversityofrenewablegenerationalongsideinterconnectiontoneighbouringcountries,flexibledemandandelectricitystorage.Combiningthesetechnologieswillreducethefrequencyandmagnitudeoftimeswhenthereistoomuchortoolittlegeneration.Regen's'DayintheLife'reportwiththeElectricitySystemOperatorshowshowanetzeropowersystemcouldwork.DemandwillincreasinglybemetwithrenewablegenerationElectricitydemandElectricitygeneration11Note:50-100TWhofelectricitywillbeexportedannuallyviainterconnectorsby2035.Source:ESOFutureEnergyScenarios2022,ConsumerTransformationscenario.NetzerorequiresapowersystemtransformationIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceThescaleofthechallengeTheenergytransitionisstillatarelativelyearlystage.However,therearealreadysignsoftheneedtoinvestinthegridasacriticalpartofthetransition.Forexample,thenumberofapplicationstoconnecttothetransmissionnetworkinthefirstthreemonthsof2023wasmorethantwoandahalftimesthetotalforthewholeof2018.Weknowwecanrisetothescaleofthechallenge.TheUKhasachievedrapidgrowthinelectricitysysteminfrastructureinthepast.Between1950and1975,electricitygenerationandassociatedgridcapacityincreasedalmostfive-fold.020406080100195019551960196519701975198019851990199520002005201020152020Capacity(GW)RapidelectricitysystemexpansionhashappenedbeforeGenerationcapacityPeakdemandSource:Ofgem,Consultationonframeworksforfuturesystemsandnetworkregulation:enablinganenergysystemforthefuture.12IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceThisreportsetsoutthescaleofthechallengeacrossthegrid13IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceGeneratorsInterconnectionDistributionnetworkoperatorsEnergyconsumersExtrahighvoltageoperation(400kV,275kV,132kV)TransmissionoperatorsKeyparticipantsRegulatorOfgemElectricitySystemOperatorESOHighandlowvoltageoperation(typically132kV,33kV,11kV,<1kV)Alldomesticandmostcommercialconsumersareconnectedtothedistributionnetwork.Somelargeindustrialandtransportdemandsareconnecteddirectlytothetransmissionnetwork.High-voltagecablesconnectGBtotheelectricitysystemsofneighbouringcountriesinIrelandandmainlandEurope.14Electricitygenerationcanconnecttoeitherthetransmissionordistributionnetwork.Generationover50MWtendstobeconnectedattransmissionlevel,andprojectswithlowercapacityaretypicallyconnectedtothedistributionnetwork.Thereiscurrentlyabout2.5GW/3GWhofbatterystorageconnectedacrosstransmissionanddistributionnetworks.Thiscapacitycoulddoubleby2024.StorageTransmission-connecteddemandIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceNetworkoperationandregulationTheelectricitynetworkinGreatBritainconsistsofahigh-voltageonshoreandoffshoretransmissionnetworkandalower-voltagedistributionnetwork.Theonshoreelectricitynetworkconsistsofapproximately20,000kmofhigh-voltagetransmissioncablesand800,000kmoflower-voltagedistributionlines.Electricityistransportedathighvoltagetominimiseenergylostintheformofheat,andsubstationstransformthepowertolowervoltagesforusebyconsumers.ThegridisownedandoperatedbyprivatisednetworkoperatorsunderaframeworkofmonopolyregulationsetbyOfgem,theindustryregulator.Thenetworksarenaturalmonopolies:customerscannotswitchtoadifferentnetworkwithoutphysicallymovingtoadifferentlicencearea.Theregulatorusespricecontrolperiodstosettheallowedrevenuesfornetworkcompanies.Theserevenuesaresetatalevelthatcoversthecompanies’costsandallowsthemtoearnareasonablereturnsubjecttothemdeliveringvalueforconsumersandachievingtheirtargetsassetbytheregulator.Thecurrentregulatorymodel,RIIO(Revenue=Incentives+Innovation+Outputs),wasintroducedtoincentivisenetworkstodeliverarangeofoutputsandbetteroverallperformance.Thetransmissionpricecontrolsanddistributionpricecontrolsaremanagedseparatelyoverdifferentperiods.ElectricityTransmission(ET)ElectricityDistribution(ED)TheElectricitySystemOperator(ESO)managestheelectricitysysteminrealtime.CurrentlyownedbyNationalGrid,theESOwillbecomepartofthenewFutureSystemOperator(ayet-to-be-establishedindependentpublicsectorbody).RIIO-ET1RIIO-ET2RIIO-ED1RIIO-ED2Pricecontroltimeline15IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface1.Lowvoltagedistribution:preparingforawaveofconsumerelectrification16IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface17EVsandheatpumpswilldriveconsumerelectricitydemandBy2035,80%ofvehiclesontheroadcouldbeelectric,and41%ofhouseholdscoulduseelectricityastheirenergysourceforheating.Thiswillincreaseelectricitydemand.However,overallprimaryenergydemandfortransportationandheatingwillfallduetothehighenergyconversionefficienciesofelectricvehicles(EVs)andheatpumpscomparedtointernalcombustionenginesandgasboilers.0100200300400500202220262030203420382042204620500%50%100%20222026203020342038204220462050Homeheatingsource(%)DomesticheatingDomesticvehiclesInanetzeroscenario,itispossiblethatby2035oversevenmillionhouseholds(23%)willuseaheatpumpfortheirspaceandwaterheating.Thegovernmentisaimingforover600,000heatpumpinstallationsperyearby2028.Heatpumpsdeliveraroundthreeunitsofheatforeachunitofelectricityused.So,whilstthenumberofhomesheatedwithelectricitycouldincreaseninefoldby2050,theannualelectricitydemandfordomesticheatingwouldonlyincreasebyafactorof3.5.Thereisstilluncertaintyovertherateofelectrification,butitisincreasinglyclearfromtheevidencethathydrogenwillhavealimitedroleinheatingourhomes.Thegridmustbereadyforaveryfastroll-outofheatpumps.Preparationforthishasbeenattheheartofthedistributionnetworks’five-yearbusinessplans.Note:AllfiguresfromNationalGrid’sFutureEnergyScenarios(2022),ConsumerTransformationscenario.81TWh22TWh77%9%Annualenergydemand(TWh)Almostninetimesasmanyhouseholdsusingelectricityforheating……butonly3.5xtheannualelectricitydemandduetothehighefficiencyofheatpumpsIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface18EVsandheatpumpswilldriveconsumerelectricitydemand0%50%100%20222026203020342038204220462050010020030040050020222026203020342038204220462050Annualdemand(TWh)Carsontheroad(%)20%ofallcarssoldinJanuary2023werebattery-electricorplug-inhybrid,andbytheendoftheyear,over1.5millioncarsontheroadwillhaveaplug.Salesofnewpetrolanddieselcarswillendin2030undergovernmentplans.Mostelectricvehicleswillbechargedatpeople’shomes.In2035,almost60%ofdomesticandcommercialEVchargingdemandwillbeprovidedbyresidentialchargepoints;allthispowerwillflowthroughthelow-voltagepartofthedistributionnetwork.AstheuseofEVsbecomesmorewidespread,sowilltheadoptionofsmartcharging(wherevehiclesarechargedattimesoflowelectricitydemand)andvehicle-to-grid(whereelectricityisreturnedtothegridattimesofhighdemand).Bothsmartchargingandvehicle-to-gridwillhelptheoperationofthelow-carbonpowersystem.Note:AllfiguressourcedfromNationalGrid’sFutureEnergyScenarios(2022),ConsumerTransformationscenario.121TWh452TWhBy2035,80%ofvehiclesontheroadcouldbeelectric,and41%ofhouseholdscoulduseelectricityastheirenergysourceforheating.Thiswillincreaseelectricitydemand.However,overallprimaryenergydemandfortransportationandheatingwillfallduetothehighenergyconversionefficienciesofelectricvehicles(EVs)andheatpumpscomparedtointernalcombustionenginesandgasboilers.DomesticheatingDomesticvehiclesIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface19FlexibleoperationofEVchargersandelectricheatingwillreducecostsThegovernmentestimatesthatanelectricitysystemthatoperatesflexiblyinresponsetorenewableoutputcouldreducecostsbyupto£10bnayearbyreducingtheamountofgenerationandnetworkinfrastructurethatneedstobebuilttomeetpeakdemand.Domesticdevicesconnectedtothelow-voltagepartofthedistributionnetworkswillbeacrucialpartofthisflexibledemand.Thebulkofdomesticdemandsideresponse(DSR)willbesourcedfromsmartelectricvehiclechargersandelectricheatingdemand.Thedistributionnetworkoperatorshavealladopteda‘flexfirst’philosophyfortheirhighervoltageassetsandareworkingonasuiteofinnovationprojectsandtrialstooperationaliseflexibility.UnlockingthepotentialofconsumerflexibilitywillinvolvereinforcingthelocalnetworkstoensuremillionsofEVsandheatpumpscanconnectwithoutdelay.708090100110120130140PeakdemandEVsmartchargingDomesticheatingDomesticappliancesIndustrial&commercialDSRV2GPeak-afterflexibilityDomesticheatingandEVchargingwillprovideover40GWofflexibilityby2050Capacity(GW)Note:Source:NationalGridFutureEnergyScenarios,ConsumerTransformationscenario.Chartshowspeakreduction(measuredinGW)ofdifferentsourcesofflexibilityin2050.DSRstandsfordemandsideresponse;V2Gstandsforvehicle-to-grid.Y-axisstartsat70GW.40GWflexibilityincludesdomesticheatandallEVcharging,includingV2G.13712121.4141780IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface-300-250-200-150-100-50050100201020152020202520302035204020452050AverageLVheadroom(%)Lowvoltagenetworkreinforcementwillberequiredbefore2035onaverage20Thereissparecapacity,butweneedtoscale-upreinforcementBasedondatafromthenetworks,thegovernmentestimatesthatthereis,onaverage,60%sparethermalcapacity(knownasheadroom)acrossalldistributionnetworkassetsinGreatBritain.Headroomisthedifferencebetweentheamountofpowerthenetworkisdesignedtodeliverandtheactualdemandonthenetwork.Withoutupgrades,thisheadroomwillbeusedupaselectricitydemandincreases.Thegovernment’scentralmodelforecaststhat,onaverage,thenetworkswillrunoutofheadroomaround2035.Thelow-voltagepartofthenetworkismadeupofhundredsofthousandsoftransformersandcables,someofwhichweredesignedover50yearsago,mainlyoperatingwithoutloadmonitoringordatacollection.Therearetwoissues:1)Duetolimitednetworkmonitoring,itispossiblethataverageheadroommaybelowerthan60%acrossthecountry2)Thereissignificantregionalandlocalvariationinheadroom,socertainareaswillrequireupgradesbefore2035-potentiallyinthenextfewyearsUpgradingindividuallow-voltagecablesandtransformerscanbeachievedrelativelyquicklyandinexpensivelycomparedtohighervoltageassets,butenmasseupgradingthelow-voltagenetworkisamajorundertakingthatwilltakeyearstodeliver.Thenetworksmustbeenabledtomaketherequirednetworkupgradesinadvanceofneedtoavoidadeliverycrunchandrestrictionsforcustomerswantingtochargetheircarorinstallaheatpump.Alargesectionoftheexistingnetworksweredesignedfor1950s,1960sand1970swheretheelectricityusageassumptionsatthetimeofinstallationwerelowerthanthecurrentstandards.HeatPumpStrategyNationalGridEDHeadroommodelledwithlatestDNOdataModelledscenario:25%lessheadroomModelledscenario:50%lessheadroomNote:Inscenariosmodelledwithlessheadroom,reinforcementisrequiredyearsearlier.Source:Ofgem/BEIS,ElectricityNetworksStrategicFrameworkAppendixI.NetZerohighdemandscenariowiththreelevelsofdistributionnetworkthermalcapacity.Whenheadroomdropsbelow0%thenetworkcapacitywillbeexceededIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceThedistributionnetworksareconfidentintheirplansFutureenergyscenariomodellingandassetmonitoring:TheDNOsalldevelopannualDistributionFutureEnergyScenarios(DFES),whichmodelfutureconsumerenergydemanddowntothepostcodelevel.Theyarealsoinstallingsensorsacrossthelow-voltagenetworktoprovidedataonhowmuchcapacityremainsonkeyassets.Dataandconnectionprocessdigitalisation:Amassivedigitalisationprogrammeisunderwayacrosstheindustrytoprocessanaloguerecordsusingimagerecognitiontechnologysothatthereisacompletedatabaseofallnetworkassets.Theyhavealsodevelopedastandardised,self-serviceconnectionsprocessforheatpumpsandEVsusingashareddatabaseofverifieddevices(moreinfoinAppendix).Planningandreinforcement:Tacticalreinforcementhasbegun,informedbyenergydemandandnetworkutilisationmodelling.Aswellasincreasingnetworkcapacity(traditionalreinforcement),networkscanmanagesomeconstraintswithothersolutions–includingprocuringflexibilityandimplementing‘smart’interventionsthatgetmorecapacityoutofexistingassets.Wherepropertiesshareasinglecable(knownasloopedservices),thesearebeingreplacedwithseparatecables.21Networkinitiatives“Corecommitment2:Ensurecustomersareabletoconnectlowcarbontechnologiesquicklyandeasily,withthenetworkbeingreadytosupportatleastanadditional1.5millionelectricvehiclesand600,000heatpumpsby2028.”“WhatourRIIO-ED2planmeansforcustomers:Customerswillhavethecapacitytheyneedtodecarbonise–theywillbeabletouseEVchargersandheatpumpsimmediatelyandatfullcapacity.”“Weshouldsupportthesubstantialgrowthinelectricvehiclesandheatpumpswithnodelaysandsimpleconnectionsprocesses”“OurCommitments:Wearecontinuallystrivingtoimprove,andwehavesetourselvesambitioustargets..tosupporttheuptakeoflowcarbontechnologiesinthemostcost-effectivemanner.”NetworkbusinessplancommitmentsIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceOfgemhastakenagamblebydelayinginvestmentIn2022thenetworkspublishedbusinessandinvestmentplansfor2023to2028toensuretheyhavethecapacityreadyaheadofneed.However,finalbudgetallowancesfornetworkreinforcementwerereducedbyOfgemby17%comparedtowhatthenetworkssubmittedintheirplans.Theregulatorbelievestheamountofinvestment,combinedwiththeircontingencymechanismstoreleasefurtherbudgetsifrequired,willbesufficienttoenablethenetworkstoreinforcetheirnetworksintime.However,knocking17%offtheinvestmentnetworksproposedisabiggamble.Willnetworksbeabletoscaleuptheircapacityandsupplychainsquicklyiffasterinvestmentisrequired?IfOfgem’sgamblebackfires,theywillhaveputnetzeroatrisk.£3,158£2,826£2,62005001,0001,5002,0002,5003,0003,500NetworkproposalDraftdeterminationsFinaldeterminationsLoad-relatedinvestment(£million)Source:ED2businessplans,Ofgemdraftdeterminations,Ofgemfinaldeterminations.Thisinvestmentwillhelpdeliverthelocalelectricitydistributionnetworksweneedtoconnectupthosenewsourcesofenergytoourhomesandbusinessesandmeetexpectedincreasesinelectricitydemand,suchasfromheatpumpsandelectricvehicles.RIIO-ED2FinalDeterminationsOfgemIfthenetworksarenotsufficientlydeveloped,therewillbenonetzero.Iftheyareslightlyover-invested,thecostsacrossthewholecustomerbasearesmall,andinanyeventtheassetswillinduecourseprobablybeneeded.DieterHelmProfessorofEconomicPolicyattheUniversityofOxford22Distributionnetworkbudgetsforreinforcementuntil2028willbe17%lowerthanoperatorsproposedIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceRecommendations1.1NetworksmustinvestaheadofincreasingdemandNetworksoperatorshavedevelopedplansandinitiativestoensurepeoplecanconnectheatpumpsandEVchargerswithoutdelaysandatfullcapacity.Theynowneedtoensuretheseplansareimplementedandstepupthepaceofchangeinkeyareas:•Carryingoutstrategicplanningofthelow-voltagenetwork.•Acceleratingdigitalisationoftheirassetdataandimprovingtheirdataquality•Proactivelydevelopingthesupplychainforbothequipmentandoutsourcedcontracts•Acceleratingtheirreinforcementprogrammes1.2OfgemshouldprovidestrategicleadershiptoenablenetzeroTheregulatorhastakenagamblewithnetzerobycuttingdistributionnetworkinvestmentplansagainsttheirdraftbudgets.Theymustnow:•Ensurethatnetworkscanaccessbudgetstiedbehind‘UncertaintyMechanisms’beforecustomersstartseeingproblemswithconnections•Ensurenetworkscaninveststrategically,aheadofneedinthispricecontrolperiod•Putreinforcementattheheartofthenextpricecontrolprocess–ensuringinvestmentismadesothenetworkhasthecapacityfornetzero1.3GovernmentshouldcommittoelectrifyingheatandtransportItisincreasinglyclearfromtheevidencethathydrogenwillhaveeitheraverylimitedroleornoroleatallinheatingourhomes.However,untilthegovernmentmakesacleardecisiononhydrogenheating,itisdifficultfornetworkstoplanandinvestfortheelectrificationofheatingthroughheatpumps.Meetingthehugeincreaseinconsumerelectricitydemandwillbeachallengefornetworks.Networksarepreparing.However,asustainedapproachfromthegovernment,Ofgemandnetworkswillberequiredtoensurethatconsumersupanddownthecountrywillbeabletoconnectquicklyandeasily.Inparticular:231.Lowvoltagedistribution:preparingforawaveofconsumerelectrificationIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface2.Transmission-distributioninterface:connectingonshorerenewablesandstorage24IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceLongconnectionleadtimesareseverelydelayingrenewablegenerationandstorageprojectsTheReviewheardfromhundredsofinnovativecompanieseagertobringnewtechnologiestomarketbutbeinghamperedbyslow,ponderousbureaucracyandanantiquatedapproachtogridconnectionsnotsuitableforamodern21stcenturyelectrifiedeconomyChrisSkidmore,MissionZero–IndependentReviewofNetZeroAskanyoneinvolvedinsustainableenergywhatthebiggestchallengetheyfaceis,andchancesarethatthey'llcitethegrid.Connectingalargevolumeofrenewablegenerationandstorageprojectsiscriticaltodecarbonisingthepowersystemby2035.Thereisapipelineofprojectsindevelopmentwithconnectiondatesinthenextfewyearswishingtoconnecttothetransmissionnetworkanddistributionnetworks.However,newprojectscriticaltonewzeroarestuckinthetransmissionqueueandnowfacedelaysofover15yearstoconnect.Thisisbecomingamajorbarriertonetzero.25-30%-20%-10%0%10%20%30%0123456789101112Connectionlead-timesonthetransmissionnetworkhaveincreasedNote:RegenanalysisofESOTransmissionEntryCapacity(TEC)Register.DataaccessedNov2017andNov2022.Overthesameperiodthepipelinehasincreasedfrom87GWto243GW.%ofcapacityinpipelineYearsuntilconnectionLongerconnectionlead-times2017pipeline2022pipelineIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceDelaystogriddevelopmentarecostingconsumersThe“ConnectandManage”regime…hasledtohighconstraintcostsforconsumersandlengtheningdelaysinconnectingnewgeneration.FrameworksforfuturesystemsandnetworkregulationOfgem00.20.40.60.811.22019202020212022Annualcosts(£bn)Thecostsofmanaginggridconstraintsexceeded£1bnin2022asgaspricessoaredSource:ESO–balancingservicessummaryOfgem’spolicyofdelayinggriddevelopmentandallowingnewgenerationtoconnecttothegridbeforefullreinforcementworkshavebeencompletedhasledtoacutegridbottlenecks.TheESOmanagesconstraintsbyturningdowngenerationinonearea,usuallyrenewablegeneration,andpayinggeneratorsinanothertoturnup.Theturn-upactionsarelargelyprovidedbygasgeneration,andsothecostofmanagingconstraintshasballoonedasgaspriceshaverocketed.Thesecostsarepassedontoconsumersthroughtheirelectricitybills.26IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface7580859095201820192020202120222023Averageturnaroundtime(days)ESOisincreasinglystrugglingtoturnaroundconnectionapplicationsin90daysSource:GBConnectionsReform,CaseforChange(ESO).90dayobligationThecurrentconnectionsprocess,whichwasoriginallyfocusedonconnectingasmallnumberoflargefossilfuelplantseveryyear,hasnotkeptpacewiththerapidchangesoccurringintheenergysector.CaseforChange,GBConnectionsReformElectricitySystemOperatorConnectionsareprovidedonafirst-come-first-servedtechnology-neutralbasis,allowingcustomerstoreservenetworkcapacitybyacceptingaconnectionagreement.Thishascreatedaqueueofconnectionswhichisitselfnowasignificantblockerfornewprojects,asgridcapacityhasalreadybeenreservedforspeculativeprojectsthatarenotprogressing.Managingnewconnectionsiscriticaltoensuringthatviableprojectsreceivetheearliestconnectiondatepossible.Thisincludes:1.Queuemanagement:ensuringallprojectshaveclearprogressmilestonessothatspeculativeprojectsthatarenotprogressingtowardsdeliverydonotblockprojectsthatareabletoprogress2.Flexibleconnectionagreements:theuseofawiderrangeofconnectionagreementssotheESOcanbelessriskaverseinitsassumptions,freeingupcapacity3.Planningassumptions:re-modellinghowstorageprojectsareassumedtooperate,asstorageshouldhelpratherthanhinderthegridThelegacyprocessformanagingnewconnectionsisnotfitforpurpose27IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface-202468101214161820142019202420292034Lowcarboncapacitychange(GWperyear)Between6–9GWperyearonaverageNote:Graphicshowsnetcapacitychange.Lowcarbonreferstorenewablesandnuclear.Capacityhasreducedinsomeyearsduetodecommissioningnuclearplants.Source:HistoriccapacityfromDUKES5.12,futurecapacityfromRegenanalysisassumingrequiredcapacityof180-220GWfromDayintheLife2035andFES2022ConsumerTransformationscenario.Theincreaseinlow-carbongenerationrequiredfornetzeroissignificantbutachievableConnectionofrenewablegenerationisoutpacingexpansionofgridcapacityImprovingthewaythatnewconnectionstothegridaremanagediscritical.However,increasesingridcapacitywillberequiredtoenabletherenewablegenerationweneedtoconnect.Todecarbonisethepowersystemandputusontrackfornetzero,180-220GWofgrid-connectedpowergenerationcapacitywillbeneededby2035.Thiswillinvolveanetcapacityadditionofbetween6and9GWperyear–ahugejumpabovetheaverageof3.3GWachievedoverthelastdecade.Inordertoenablenewgenerationtoconnecttothenetworkearlier,thegovernmentin2010implementedagridaccessregimecalledConnectandManage.Thisallowedgenerationprojectstoconnecttothetransmissionsystemaheadofthecompletionofwidertransmissionreinforcementworks.28…undertheConnectandManageregimemarket-ledincrementstotransmissiongridcapacityperpetuallylaggedacceleratingrenewablegeneration.Frameworksforfuturesystemsandnetworkregulation-OfgemWehavetoshifttoasystemthatdoesnotlagbehind,butthatanticipatestherenewablegenerationandbuildsthegridcapacityoutinadvancesothatwhentherenewablegeneratorsarereadytoconnect,thegridcapacityisalreadythere.AkshayKaul,DirectorofInfrastructureandSecurityofSupply,Ofgem(BEISselectcommittee,inquiry:Decarbonisationofthepowersector)IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceDistributedpowergenerationnowflowsuptotransmissionnetwork-leadingtolongconnectiondelaysDistributionTransmissionOldsystemTraditionally,powerflowedfromlargecentralisedgenerationonthetransmissionnetworkdowntodistributionlevel.NewsystemThereisnow34GWofgenerationconnectedtothedistributionnetworks(andsome58GWinthepipeline),sopoweroftenflowsupaswellasdown.TheESOnowneedstoconsidertheimpactonthetransmissionsystemofthegeneratorsconnectedtothedistributionnetwork.Thisnetworkimpactassessmentprocess,knownasaStatementofWorks,hasaffectedtheconnectionofrenewableandstorageprojectsinseveralways:•Delays:Relativelysimpleconnectionrequestsintothedistributionnetworkcanbedelayedastheyarewrappedintolengthyassessmentsoftransmissionimpact.•Higherconnectioncosts:Thetransmissionreinforcementcosts,whichcanbehigh,aresharedbetweenconnectingprojects.•Unworkableareas:Theriskthatothersmaypullout,leavingthereinforcementbilltobesharedamongfewerprojects,iscausingmanyareastobeunworkablefornewgenerationprojects.Therearetwobroadapproachestocreatingabettersystem:1.Asinglequeueacrossbothtransmissionanddistribution2.DNOshaveanagreedheadroomateachgridsupplypointthattheymanageconnectionstostaywithinTheESOandDNOsneedtoagreeonthebestapproachandmoveontoimplementation.29IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceInitiativeScope1.Allowingdeveloperstosurrenderconnectionagreementswithoutpenaltytofree-upcapacity2.Updatedprojectprogressionassumptions3.Morerealisticassumptionsforstorageprojects4.Contractsthatallowmorerobustqueuemanagement5.EarlierconnectionsforbatteryprojectsthatacceptflexibleconnectionagreementsGBConnectionsReform(InputfromTransmissionOperators,ENA,Ofgem,Government)“TheGBConnectionsReformprojecthasbeenlaunchedtoaddressthefundamentalneedforreform.Thisreformprojectformspartofourlonger-termvisionforchangeintheGBESOConnectionsspace.”Theobjectiveistodeliverareformedconnectionsprocessthat:1.Deliversvaluetoconsumers2.SupportsNetZeroandEnergySecurity3.Deliversimprovementstocustomerexperienceandengagement4.Deliversawholesystemapproach–i.e.factorsindistribution5.Efficientlyadvancesprojectsthatarereadytoconnect6.Embracesconnectioncomplexityinanevolvingenergysystem7.Isfuture-proofandadaptable1.Reformingthedistributionnetworkconnectionsqueue,promotingmatureprojectsthatareclosertodeliveryabovethosethatmaybe‘blocking’thequeue.2.Changinghowtransmissionanddistributionnetworkscoordinateconnections,improvingtheirinteractivity.3.Greaterflexibilityforenergystoragethroughnewcontractualoptions.TheENAistheindustry-fundedbodythatrepresentstheenergynetworksintheUK.StrategicConnectionsGroup(InputfromESO,DNOs,TransmissionOperators)AddressingtheconnectionschallengeGovernment,Ofgemandthenetworkoperatorshaveactionplanstoaddressconnectionchallenges:•Thegovernmenthasacceptedthereisaproblemandannouncedin“PoweringUpBritain”thatareviewofconnectionswouldbeheldbythesummer.•Ofgemhaslaunchedaconsultationonframeworksforfuturenetworkregulation,proposingtomovefrom“ConnectandManage”to“InvestandConnect”–wheregridexpansionoccursinanticipationofgeneration.•Ofgemhasalsostateditwilltakeacentralroleindrivingconnectionsreforminitsopenletter.•Thenetworksareworkingtogether,andsomesolutionshavealreadybeenannounced(seetable).Five-pointplanGridcapacityisoneofthethingswhichreallyconcernsme.IfyouwanttoaskwhythereisaDepartmentforEnergySecurityandNetZeronow…itissothatwegetsomerealfocusonsolvingthisproblem.GrantShappsMP,SecretaryofStateforEnergySecurityandNetZero30IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceRecommendationsGovernment,Ofgem,ESOandnetworkshavebeenslowtoproperlyplanandinvestforthescaleofrenewablegenerationandstoragethatwillneedtoconnecttothegrid.Theyhave,however,nowacceptedtheproblemandsetoutshort-termactionplansandlonger-termreviewstoaddresstheproblem.Thefocusnowneedstobeondeliverytoachievesignificantimprovementsinconnectiontimelines.Threekeyareasrequirelaserfocus:2.1DeliveroninvestmentaheadofneedMovingtoagridinvestmentregimethatdeliversgriddevelopmentsincoordinationwithandaheadofnewgenerationconnectionsiscritical.ThegovernmentandOfgemmustdeliverontheirproposalfor“InvestandConnect”andensurethenewFutureSystemOperatorisupandrunningtoleadaclearplanforgridinvestment.2.2ReformtheconnectionsprocessTheESOandnetworkoperatorsneedtoimplementasmarterconnectionsprocesstogetgigawattsofgenerationflowingontothegrid,including:•Prioritiselowcarbonprojectsforconnectionoverfossilfuelgeneration.•Enableshovel-readyprojectstoconnectratherthanbeingstuckinthequeuebehindprojectsthataren’tprogressing.•OfferflexibleconnectionagreementswheretheESOorDNOcanturngenerationoffforabriefperiodifneededtoprotectthetransmissionsystem.2.3ReformtheapproachforinteractionbetweentransmissionanddistributionnetworksTheprocessforassessinghowprojectsconnectingatdistributionwillaffectthetransmissionnetworkisacriticalbarrierforconnectingnewgeneration.TheESOandDNOsneedtoputinplaceanewprocesstoresolvetransmissionbarrierstodistributionconnectionsresultinginlongqueuestoconnectforrelativelysmallprojects.312.Transmission-distributioninterface:connectingonshorerenewablesandstorageIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface3.Transmission:connectingoffshoreandlarge-scalegeneration32IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceThegridcouldmakeorbreaktheUK’sambitiousoffshorewindtargetOffshoredevelopmentareas050100150200250300350400GBannualgeneration(TWh)Annualgenerationfromoffshorewindwillalmostquadrupleby2030Source:ElectricitySystemOperatorfutureenergyscenarios(ConsumerTransformationScenario).Thisscenarioismostalignedtowiththegovernment’sInoperationandindevelopmentTheBritishEnergySecurityStrategysetoutthegovernment'sambitiontoconnectupto50GWofoffshoregenerationtotheelectricitynetworkby2030.Facilitatingthisambitionwillrequiresignificantreinforcementstotheonshoreelectricitytransmissionnetworkandachangetothecurrentregulatoryframeworkinordertoacceleratedeliveryoflargeprojects.AcceleratingStrategicTransmissionInvestment(ASTI)-Ofgem33IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceB6B6transmissionboundarybetweenScotlandandEnglandInvestmentinnetworkcapacityhasfallenbehindgenerationdeploymentInvestmentinGBnetworkcapacityhasfallenbehindtherateneededtokeepupwithgenerationdeployment:1.Ofgemhasbeenslowtoapprovenewinvestmentunderits“ConnectandManage”regime2.Transmissionoperatorshaveunderspent:NationalGridETunderspentitscapexbudgetby23%(£1bn)inRIIO-ET1(2013-2020).3.Largetransmissionprojectsareinherentlychallenging,withleadtimesofupto15yearsTransmissionboundaries34051015202530354045502023202820332038Powerflowacrossboundary(GW)Withoutfurtherreinforcement,powerflowsfromScotlandwillexceedtransmissioncapacityformuchoftheyearSource:B6boundaryflowfromElectricityTenYearStatement(ETYS),ESO.90%ofannualpowerflowsCapacity50%ofannualpowerflowsIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceDelayedgridupgradesarealreadygeneratingsignificantcosts00.20.40.60.811.22019202020212022Annualcosts(£bn)Constraintcostsexceeded£1bnin2022ScotlandboundariesScottishborderEnglandandWalesboundariesGBSource:ESO–BalancingservicessummaryGridbottlenecksresultinconstraintmanagementcosts,mainlymadeupofpaymentsforturn-upinstructionstogasgeneratorswhenwindgenerationisturneddown.Constraintsaretheresultofapolicytodelaythecostsassociatedwithinfrastructureinvestmentandinsteadmanageconstraintsastheyarise.Theproblemwiththisapproachisthatthedelaysingridinvestmenthavebecomeacute,andwholesalegaspriceriseshaveincreasedthecostsofrelyingongas-firedgenerationforturn-upactions.Regen’sreportfoundacceleratingplanninganddeliveryoftransmissionnetworkinvestmentasthetopsolutiontorisingconstraintmanagementcosts.35IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface2022/23sawamajorshiftinapproachtowardsanticipatoryinvestmentWherepreviouslythemantrafromOfgemofachieving“netzeroatthelowestcosttoconsumers”hadresultedindelayinginvestmentsintransmissiontoavoidregretcosts,itisnowacknowledgedthatthelowestcostrouteinvolvesacceleratingtransmissionprojectdevelopment.Thisshiftinthinkinghasresultedinthreesignificantdevelopmentstowardsamorestrategicandproactiveapproachtonetworkplanning:1.TheoutcomeoftheOffshoreTransmissionNetworkReview–asingle,integratedHolisticNetworkDesignthatsupportsthelarge-scaledeliveryofelectricitygeneratedfromoffshorewind2.TheintroductionofanewAcceleratedStrategicTransmissionInvestmentframeworkforlargeonshoreelectricitynetworkprojects(includingmeasuresdesignedtostreamlinetheregulatoryapprovalprocessandintroducestrongerincentives/penaltiesfortimelyprojectdelivery).3.ThereplacementoftheexistingnetworkdevelopmentprocesswithaCentralisedStrategicNetworkPlan(CSNP)tobedevelopedbytheFutureSystemOperator(FSO,anewpubliccorporation).36NewsubseacableNewnetworkneedsidentifiedthroughtheHolisticNetworkDesignOnshorenetworkneedOffshorewindfarmIllustrativeroutesandlocations.IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceSupplychaincapacityandconsentingcouldstallprojectsCompetitionforinvestment:Readyingthetransmissionnetworkwillinvolveincreasingcablelengthby30%andanincreaseinthenumberofgridandbulksupplysubstationsby50%,accordingtoanalysisbyBEAMA,thetradeassociationforenergyinfrastructuremanufacturers.AsignificantriskisthattheUKdoesnotsecureinvestmentinmanufacturingcapacityforthecriticalcomponentswhenacrosstheglobe,gridsarebeingupgraded.02004006008001,0002022203020402050Globalannualgridinvestment($bn)Consentingfor9GWperyear:Inthegovernment’sownwords,theNationallySignificantInfrastructureProjects(NSIP)consentingregime“isincreasinglydifficulttonavigate”.Theriskisthat,despiterecentdecisionstoaccelerateinvestment,withoutrapidchangestotheconsentingregime,thesecriticalprojectswillnotbedeliveredontimeduetoconcernsaboutcommunityandenvironmentalimpacts.TheUKwillneedtocompetetoattractmanufacturingcapacityasgridinvestmentsurgesglobally$871bn$310bnSource:BloombergNEF.NewsubseacableNewnetworkneedsidentifiedthroughtheHolisticNetworkDesignOnshorenetworkneedOffshorewindfarmIllustrativeroutesandlocations.37IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceRecommendations3.1TheFutureSystemOperatorneedsacleartimelineandremitEstablishingtheFSOasapublicbodywitharemittooverseeaclearstrategicplanforthetransmissionnetworkisakeystep.However,thetimelineforitscreationisunclear(thegovernment’senergysecurityfactsheetgavearoughtimelineof“by,orin,2024”),whichcouldjeopardisethedeliveryoftheCentralisedStrategicNetworkPlaninthe2024/25regulatoryperiod.Thegovernmentshould:•MinimiseuncertaintybyputtingtheFSOinplaceassoonaspossible•EnsurethattheFSOhasaclearstrategicdirectiontodelivernetzeroandtheindependenceandcapacitytodeliver.3.2EnsurethesupplychainhassufficientcapacitytodeliverprojectsInvestmentintransmissionnetworksisgrowingrapidlyacrosstheglobe.Todate,electricitynetworkinfrastructuresupplychainshavereceivedlessfocusthanthoseforgeneration(particularlyoffshorewindandnuclear).Transmissionoperatorsandthegovernmentshould:•Preventthesupplyofcriticalcomponentsfromdelayingtransmissionprojects•SecureinvestmentinUK-basedmanufacturingcapacitywhereappropriate•Ensurethatdeliverypartnershavethecapacity,withthenecessaryskillsandworkforce,todeliverNetzerowillnotbepossiblewithouttherapidbuildoftransmissionprojectsthathavealreadybeenapprovedfordeliverybyOfgem.Itiscriticalthattheseprojectscannowprogressatthefastpaceneededofbetween6-9GWperyearby2035.3.3SpeeduptheplanningandconsentingprocessThegovernmenthasalreadycommittedtoreformingtheplanningprocesstoensurelargetransmissioninfrastructurecanbebuiltontime.Itshouldensurethat:•Aclearnationalplanningpolicystatementismadeontheimportanceofelectricitynetworkinfrastructure•Netzeroisgivenproperweightintheplanningframework•CommunitybenefitsaredeliveredtoareashostinginfrastructurethatiscriticaltoachievingtheUK’sstrategicobjectives383.Transmission:connectingoffshoreandlarge-scalegenerationIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterface39Wholegrid:investmenttoachievethetransformationIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceSignificantgridinvestmentisrequired,butnetworkunitcostscouldfallInitscentralscenario,thegovernmentestimatesthatifnetzeropoliciesarenotadopted,then£70bnof“baselineinvestment”inonshoreelectricitynetworkswillberequiredby2050.Toenableallnetzeroandenergysecuritybenefits,anadditional£100-140bninvestmentisrequired.However,thereissignificantuncertaintyintherequirementtoreinforcelow-voltagedistributionnetworks.InascenariowheretheentireLVnetworkhas50%lesssparecapacitythancurrentlyestimated,theadditionalinvestmentcouldbeupto£240bn.020406080100120140160203020402050203020402050NetZeroLowerDemandNetZeroHigherDemandCumulativeinvestment(£bn)TransmissionDistributionPreparingthegridfornetzerowillrequirebetween£100-140bnofadditionalinvestment£100-140bntopreparethegridfornetzeroby2050Source:ElectricitynetworksstrategicframeworkAppendixI,DepartmentforEnergySecurityandNetZero.Per-unitnetworkcostsforconsumerscouldfall40IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceSignificantgridinvestmentisrequired,butnetworkunitcostscouldfall£100-140bntopreparethegridfornetzeroby2050Per-unitnetworkcostsforconsumerscouldfall3035404550552020202520302035204020452050Averagenetworkcosts(£/MWh)NetworkcostsperunitcouldfallinthelongtermNetZerohighdemandNetZerolowdemandBaselineTheelectricitydemandundernetzerowillincreasefrom275TWhtoaround800TWhin2050.Whilstincreasesinnetworkinvestmentwillinvolvehighertotalnetworkcharges,asthegriddeliversmoreelectricity,thenetworkcostsperunitcouldfallfromaround£48/MWhtounder£40/MWhinahigh-demandscenario.Ifdemandislower,networkcostsperunitwillstaybroadlyflat.Source:ElectricitynetworksstrategicframeworkAppendixI,figure13.41IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceInvestmentinthegridwillunlockthebenefitsofnetzeroAimingtobecomeanetenergyexporterduringanenergycrisismayseemambitious.However,analysisbyRegenhasshownthatitisachievableby2040–enabledbyacceleratingthetransitiontonetzeroandrapidlyreducingdependencyonimportedfossilfuels.Greaterenergyindependencewould:•Reducevulnerabilitytoenergypricefluctuationsandshortages•ImprovetheUK’stradedeficit•Reduceexposuretogeopoliticalrisks787TWhnetimportin202225TWhnetexportin2040(1,000)(500)05001,0001,5002,000ImportExportNetimportImportExportNetexportAnnualenergyflow(TWh)ImportExportSource:RegenAnalysis–anetenergyexporterby2040.42Anetexporterofenergyby2040AccesstolowcostenergyTheeconomicopportunityofthe21stcenturyDoingmorewithlessenergyGreatBritaincouldbecomeanetenergyexporterby204020222040IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceTheenergycrisisof2021and2022hasshowntheeconomicimportanceofaccesstoreliable,low-costsourcesofenergy.Evenbeforetherecentpricespike,renewablesweresignificantlycheaperthanfossilalternatives.By2035,70-80%ofpowergenerationwillbefromwindandsolaratasignificantlylowerlevelisedcostofenergythannaturalgasorotherfossilfuels.43020406080100120140GasNuclearLargesolarOffshorewindOnshorewindCost(£/MWh)ThelowestcostgenerationtechnologiesareallrenewableUpperestimateLowerestimateSource:BEISElectricityGenerationCosts2020and2016–beforetheenergycrisis.InvestmentinthegridwillunlockthebenefitsofnetzeroAnetexporterofenergyby2040Accesstolow-costenergyTheeconomicopportunityofthe21stcenturyDoingmorewithlessenergyIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceAnetexporterofenergyby2040AccesstolowcostenergyTheeconomicopportunityofthe21stcenturyElectricvehiclepowertrainsandheatpumpsaremoreefficientthanthecombustionenginesandboilersthattheyreplace.Thissuperiorefficiencywillallowconsumerstotravelandhavewarmhomesforlessenergy.44InvestmentinthegridwillunlockthebenefitsofnetzeroDoingmorewithlessenergy010020030040050060070080090020222026203020342038204220462050Annualenergydemand(TWh)CarsDomesticheatingDoingmorewithlessenergyNotes:Source-RegenAnalysisofESOFutureEnergyScenarios,ConsumerTransformation.Y-axisreferstoenergyfromallfuelsatpointofuse.IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceInChrisSkidmore’sreview,netzerowasframedastheeconomicopportunityofthe21stcentury.Astheglobaltransitiontocleanenergyhasenteredanewacceleratedphase,withtheUSAannouncing$400bnoffundingforcleanenergyandtheEUplanninga€600bnEuropeanGreenDeal,theglobalmarketopportunityforUKbusinessescouldbeworthmorethan£1tnby2030.CapturingashareoftheeconomicbenefitswillbecriticaltoestablishingtheUK’slong-termeconomicfuture.Asthisreporthasshown,transitioningtheGBenergysystemtocleanpowerwillnotbepossiblewithoutthenecessaryelectricityinfrastructure.Aswellasthewideropportunitiesthatnetzerowillbring,investmentsininfrastructurewillcreatearangeofeconomicopportunities:•TheeconomicopportunitiescreatedfrominvestmentinelectricitysupplywillbeembeddedintheUKasitisinherentlyadomesticindustry.Forevery£1millionofspendingonelectricity,eightfull-timeequivalentjobsaresupportedthroughouttheUK.Thiscomparestolessthanthreeinthecaseofmoreimport-dependentpetrolanddieselsupply.•ReinforcingGreatBritain’sonshoreelectricitynetworktomeetnetzerocoulddirectlysupportanadditional50,000–130,000FTEjobsby2050,contributinganestimated£4-11bnofGVAfortheUK.•Upgradingourelectricitynetworktohandletheelectrificationofheatwillallowthecreationofupto50,000jobsby2030inheatpumpinstallationsalone.•Flexibilityfromtechnologiessuchaselectricitystorage,smartchargingofelectricvehicles,flexibleheatingsystemsandinterconnectioncouldcreateupto24,000jobsby2050.45InvestmentinthegridwillunlockthebenefitsofnetzeroAnetexporterofenergyby2040AccesstolowcostenergyTheeconomicopportunityofthe21stcenturyDoingmorewithlessenergySources:MissionZero–IndependentReviewofNetZero(page22),Analysisofrefuellingsupplychainactivity(page1),ElectricityNetworksStrategicFramework(page20),HeatandBuildingsStrategy(page53),EnergyInnovationNeedsAssessments(page29)IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceGlossaryTermDescriptionCCCClimateChangeCommitteeConsumerTransformationOneofthefutureenergyscenariosdevelopedbyESO.ThisscenarioismostalignedwiththeClimateChangeCommittee’sBalancedPathway.DNODistributionNetworkOperatorESOElectricitySystemOperator,ownedbyNationalGridbutoperationallyindependentfromthetransmissionoperator.ENAEnergyNetworksAssociation,theindustrybodyfortheenergynetworks.FESFutureEnergyScenariosdevelopedbytheelectricitysystemoperator.HeadroomSparecapacity.Thegapbetweentheratingoftheelectricitynetworktosupplyelectricaldemandandtheactualdemandinthatpartofthenetwork.InterconnectorsConnectiontoneighbouringelectricitysystemsinIrelandandmainlandEurope.OfgemEnergyregulator(officeforgasandelectricitymarkets).PricecontrolAmethodofsettingtheamountofmoney(allowedrevenue)thatcanbeearnedbythenetworkcompaniesoveraperiodoftime(currently5years).RIIORevenue=Innovation+Incentives+Outputs.Thisisthecurrentmonopolyregulatoryregimeforelectricitytransmissionanddistribution.RIIO-ED2CurrentpricecontrolperiodforDistributionRIIO-ET2CurrentpricecontrolperiodforTransmissionTOTransmissionOwnerTransformerAdeviceusedtochangethevoltageofelectricity.46IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceAppendix1.ElectrificationofheatThedistributionnetworkshavedevelopedheatstrategiestoconsiderhowtheshiftawayfromfossilheatingwillimpacttheirnetworksandtoensurethegridisnotabarriertotheuptakeofelectricheating.Theirmainfocushasbeenensuringthatthegridisreadyforawaveofheatpumpinstallations.Innewdevelopments,thecablesandelectricalequipmentaredesignedtocaterfortheelectricalloadoftheheatpumplikeanyothernewgridconnection.However,mostheatpumpswillberetrofittedintopropertiescurrentlyheatedwithgas,sothedemandontheelectricitynetworkwillincrease.Insomecases,demandwillbehigherthantheoriginalnetworkdesignassumptions–somainscablesandtransformerswillneedtobereplacedanduprated.TheEnergyNetworksAssociation(ENA)hasdevelopedaconnectionsprocessthatisstandardisedacrossalldistributionnetworks,usingashareddatabaseofverifiedheatpumpmodels.Mostinstallationsarestraightforward–thedeviceisconnected,andthentheDNOisnotified.Largerheatpumpsratedtoover8kWandthosenotinthedatabaserequireanapplicationtothenetworkinadvanceofconnection.Thiscouldbecomeabottleneckasrequeststoconnectrampup.TheDNOscarryoutannualDistributionFutureEnergyScenariosmodelling,whichformsthefoundationoftheirstrategicinvestmentprocess.Theuptakeofdifferentheatingtechnologiesismodelled,insomecases,downtothegranularityofindividualpostcodesorstreets.Whilsttherateofuptakevariesacrossscenarios,allscenariosprojectwidespreaddeploymentofheatpumps.Note:Heatpumppowerrequirementsandassociatedreinforcementcostsfortypicaldomesticretrofitinstallations,fromNationalGridheatpumpstrategy.47Homesinlicencearea(Millions)32100.51.52.5Note:exampleheatpumpuptakefromNationalGrid’sDistributionFutureEnergyScenarios(WestMidlandsDFESTechnologySummaryReport2022).HeatpumpsizeApprox.connectionlead-timeNetworkconsiderationsApprox.connectioncostUpto16A(3.4kW)ImmediateNoneNoneUpto32A(7.6kW)ImmediateinmostcasesUsuallynoneUsuallynoneOver32A(over8kW)4-8weeksLikelyupgradetoservicecableandlocalmains£1000-£3000IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceAppendix2.TransmissionanddistributionpipelineanalysisNote:RegenAnalysisoftheTransmissionEntryCapacityRegisterandtheDNOs’EmbeddedCapacityRegisters(dataaccessedMay2023).69GW180GW287GW34GW92GW48050100150200250300350400ConnectedConnectedby2028Connectedby2033ConnectedMWAcceptedtoConnectTransmissionDistributionCumulativeCapacity(GW)RenewablesandstorageprojectswilldriveahugeincreaseinconnectionsoverthenextdecadeSolarPVOtherOnshoreWindOffshoreWindNuclearHydro+pumpedstorageElectricityStorageCoalCCGT&OCGT72GW186GW334GW29GW108GWIntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceAppendix3.Transmissionconnections02004006008001,00020182019202020212022Jan-Mar2023TransmissionconnectionapplicationsConnectionapplicationshavesurgedSource:GBConnectionsReform,CaseforChange(ESO).Thenumberofapplicationstoconnecttothetransmissionnetworkinthefirstthreemonthsof2023ismore2.5xtheannualtotalfiveyearsago.Firstthreemonthsof2023.49IntroductiontothechallengeaheadInvestmenttogetthereExecutivesummary1.Lowvoltagedistribution3.Transmission2.Transmission-distributioninterfaceRegenisanindependentnotforprofitcentreofenergyexpertiseandmarketinsightwhosemissionistotransformtheworld’senergysystemsforazerocarbonfuture.ThisreportwassponsoredbyMCSCharitableFoundationPreparedbyFrankHodgsonReviewedbyMerlinHymanAllrightsreserved.Nopartofthisdocumentmaybereproducedorpublishedinanyway(includingonline)withoutthepriorpermissionofRegen.Regen,BradninchCourt.Exeter,EX43PL+44(0)1392494399admin@regen.co.ukregen.co.ukRegisteredinEnglandNo:04554636
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