Written evidence submitted by National Grid
Thank you for the opportunity to give evidence to the Committee on 21 March. As per your letter on 28 March, please find enclosed the requested further information to supplement my oral evidence.
1. What technological innovations are you adopting to understand the vulnerabilities in your systems, and their interdependencies with other systems?
We are continuously working to improve our understanding of the vulnerabilities of our systems alongside developing new methods in which to mitigate and manage them. This requires us to leverage innovative products, services and processes in order to reduce or avoid costly asset or service downtime, address vulnerabilities and maintain business operations. For example:
- In other instances, we’ve developed a first-of-a-kind Climate Change Risk Tool that enables us to better understand the impact of climate change hazards. This tool means we can forecast where, when and how climate change impacts will affect our infrastructure which in turn allows us to plan ahead and factor in weather hazards when building and maintaining our assets.
- We’ve also spent 2 years planning and successfully executing a loss of power exercise across a 350 mile stretch of the electricity transmission networks from Scotland to England. This involved teams from National Grid Electricity Transmission, National Grid Electricity System Operator (NG ESO), Scottish Power Energy Networks and Drax Power. Emergency planning tests like this one really give confidence in planning and execution across multiple interconnected parties.
- More broadly NG ESO has launched an industry-wide programme to develop a Virtual Energy System – a digital twin of Great Britain’s entire energy system. This is a tool that will be available to the whole industry, bringing together every individual element of our system to create a collective view which will give us more dynamic intelligence around all aspects of the energy industry. The Virtual Energy System will also provide us all with a virtual environment to test, model and make more accurate forecasts – supporting commercial decision-making, while enabling us to understand the consumer impact of changes before we make them. https://www.nationalgrideso.com/electricity-transmission/news/introducing-virtual-energy-system
2. What is the percentage of the average customer energy bill that is currently spent on resilience, and how that is likely to change in future?
- We have three network businesses in the UK that each spend varying amounts specifically on resilience, representing varying contributions on the customer bill.
- For NGET, National Grid Gas Transmission (NGGT) and Western Power Distribution (WPD), we will collectively spend ~£1,221.5m on resilience in the RIIO ED 2 (the price control for the electricity distribution network, 2023-2028) and T2 (the price control for the high voltage electricity transmission networks and high-pressure gas transmission networks, 2021-2026) periods. Whilst Ofgem did not fully fund up front all our residence proposals there are opportunities to request further allowances during the rate case period and we are confident we will be able to fund everything we need to for resilience.
- We are also spending ~£5,237.9m across the three businesses on asset replacement and refurbishment. We have systematic approach to asset replacement and refurbishment which is also a key resiliency investment, even though it is not explicitly categorised as such.
- Every 5 years, Ofgem review and assess our proposed expenditure to ensure a fair and balanced outcome for our customers over the next regulatory price control period. For NGET, a new regulatory price control period started in 2021.
- Under a price control, the allowed expenditure on resilience is largely fixed within the period but could increase or decrease in subsequent regulatory periods, subject to Ofgem's assessment of our plans. Within the 5-year price control period, Ofgem can adjust our allowed expenditure (either up or down) in response to changing circumstances during the period using a number of mechanisms.
Group Chief Engineer & Group Director of Safety, Health & Business Resilience
7 April 2022
-  NGET cost on consumer: £23.60 p/a, £7.1bn proposed spend, percentage resilience related impact on consumer bill = 8% on resilience, ~50% on asset replacement and refurbishment.
- WPD cost on consumer: £92.66 p/a, £6.2bn proposed spend, percentage resilience related impact on consumer bill = ~3.17% (not including censored information e.g. cyber) on resilience, ~16.85% on asset replacement and refurbishment.
- NGGT cost on consumer: £8.85 p/a, £2.76bn proposed spend, percentage resilience related impact on consumer bill = ~17.58% on resilience, 24.86% on asset replacement and refurbishment.