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National Grid plc

Gb00bdr05c01, multiline utilities.

• National Grid : WPD RIIO-ED2 final business plan - Dec 2021

Western Power

Distribution

RIIO-ED2 final business plan

Investor Relations | December 2021

"Our commitment to customers for RIIO-ED2:

A transformed energy network to drive net zero by as early as 2028 across our region. This is what WPD's highly ambitious Business Plan for 2023-2028(RIIO-ED2) will deliver. It has been co- created with more than 25,000 stakeholders and future customers and has received significant levels of acceptability from wider consumers"

Highlights from our business plan

Investment of £6.7bn during 2023-2028 with embedded efficiency savings of £723m

• A 27% increase on annual average expenditure in RIIO-ED1
• Capex of £6.1bn across the regulatory period
• The average customers' bill to remain broadly flat in real terms
• 96% of customers found the plan fully acceptable

Large expenditure in network resiliency, customer service support and new infrastructure

• The business and its regions to be net zero by as early as 2028, the fastest commitment in the UK
• To be ready for 1.5m EV's and 600,000 heat pumps, by providing timely, affordable low carbon technology connections, a 279% increase in our EV commitment compared to RIIO-ED1
• 1.2m vulnerable customers to be offered a smart energy advice plan every two years
• The average customer power cut will only last 22 minutes by end of RIIO-ED2, every two years
• A target of 93% for customer satisfaction

• Sustainability - leading the drive to net zero as early as possible
• Connectability - enabling customers to connect when they want to
• Vulnerability - first class customer support where everyone benefits

• Affordability - maintaining excellent customer service, safety and network performance and transforming the energy grid, while keeping bills broadly flat

RIIO-ED2 Timeline

Vulnerability Affordability

• Responsible for distributing electricity to 8m customers
• Operating a network of assets across the Midlands, South West and Wales, serving homes and businesses
• The top performing DNO for overall customer satisfaction since 2015, with an average score of 90%
• Helped 92,000 fuel poor customers save more than £37m on their energy bills since 2015
• Delivered a 38% reduction in power cuts and a 48% reduction in power cut duration since 2015
• Reduced our business carbon footprint by 36% since 2015
• Over and above our plan, we spearhead the UK's largest rollout of flexibility services and are increasing available network capacity for demand growth by 709MW

Further highlights of WPD's final

RIIO-ED2 business plan

• Targeting additional savings of £95m through innovation and digitalisation
• Maximising efficiency of the existing network, will save money for customers by avoiding £94m in conventional reinforcement
• A new same day connections response for low carbon technologies to enable a significant increase in renewable generation
• Increase the resilience of the network to environmental factors and to cyber and physical attacks
• £1m 'Community Matters' Support Fund plus £540k to install solar PV at 45 schools per year funded by shareholders

WPD's RIIO-ED2 baseline totex

Engineering Management

Changes to our draft business plan

• Our plan is now based on expenditure to achieve WPD's Best View, which represents the most realistic uptake of low carbon technologies and demand growth
• Clearer quantification of efficiencies
• Six final Consumer Value Propositions
• An updated expenditure total and financing parameters including cost of equity: 4.96%

Important notice

Our proposed financial package

Note: CPIH real, RIIO-2 average

• Assumed dividend yield: 5%
• Totex capitalisation rate: 75%
• 45-year straight line depreciation for new assets

This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information with respect to National Grid's financial condition, its results of operations and businesses, strategy, plans and objectives. Words such as 'aims', 'anticipates', 'expects', 'should', 'intends', 'plans', 'believes', 'outlook', 'seeks', 'estimates', 'targets', 'may', 'will', 'continue', 'project' and similar expressions, as well as statements in the future tense, identify forward-looking statements. Furthermore, this document, which is provided for information only, does not constitute summary financial statements and does not contain sufficient information to allow for as full an understanding of the results and state of affairs of National Grid, including the principal risks and uncertainties facing National Grid, as would be provided by the full Annual Report and Accounts, including in particular the Strategic Report section and the 'Internal control and risk factors' section on pages 236 to 239 of National Grid's most recent Annual Report and Accounts for the year ended 31 March 2021, as updated by National Grid's unaudited half-year financial information for the six months ended 30 September 2021, published on 18 November 2021. Copies of the most recent Annual Report and Accounts are available online at www.nationalgrid.com or from Equiniti Limited. Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this document. The content of any website references herein do not form part of this document.

Further information

Nicholas Ashworth

Director of Investor Relations

• +44 (0) 7814 355590 [email protected]

James Flanagan

Investor Relations Manager (US)

• +44 (0) 7970 778952 [email protected]

National Grid plc 1-3 Strand London WC2N 5EH United Kingdom

Angela Broad

Senior Investor Relations Manager

• +44 (0) 7825 351918 [email protected]

Caroline Dawson

Investor Relations Manager

• +44 (0) 7789 273241 [email protected]

Peter Kennedy

• +44 (0) 7966 200094 [email protected]

Investor Relations Officer

• +44 (0) 7899 928247 [email protected]

@Grid_Media

nationalgrid.com/investors

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National Grid plc published this content on 02 December 2021 and is solely responsible for the information contained therein. Distributed by Public , unedited and unaltered, on 02 December 2021 11:40:07 UTC .

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Overview and key findings

Tracking cop28 progress.

• United States
• Latin America and the Caribbean
• European Union
• Middle East
• Japan and Korea
• Southeast Asia

Cite report

IEA (2024), World Energy Investment 2024 , IEA, Paris https://www.iea.org/reports/world-energy-investment-2024, Licence: CC BY 4.0

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The world now invests almost twice as much in clean energy as it does in fossil fuels…, global investment in clean energy and fossil fuels, 2015-2024, …but there are major imbalances in investment, and emerging market and developing economies (emde) outside china account for only around 15% of global clean energy spending, annual investment in clean energy by selected country and region, 2019 and 2024, investment in solar pv now surpasses all other generation technologies combined, global annual investment in solar pv and other generation technologies, 2021-2024, the integration of renewables and upgrades to existing infrastructure have sparked a recovery in spending on grids and storage, investment in power grids and storage by region 2017-2024, rising investments in clean energy push overall energy investment above usd 3 trillion for the first time.

Global energy investment is set to exceed USD 3 trillion for the first time in 2024, with USD 2 trillion going to clean energy technologies and infrastructure. Investment in clean energy has accelerated since 2020, and spending on renewable power, grids and storage is now higher than total spending on oil, gas, and coal.

As the era of cheap borrowing comes to an end, certain kinds of investment are being held back by higher financing costs. However, the impact on project economics has been partially offset by easing supply chain pressures and falling prices. Solar panel costs have decreased by 30% over the last two years, and prices for minerals and metals crucial for energy transitions have also sharply dropped, especially the metals required for batteries.

The annual World Energy Investment report has consistently warned of energy investment flow imbalances, particularly insufficient clean energy investments in EMDE outside China. There are tentative signs of a pick-up in these investments: in our assessment, clean energy investments are set to approach USD 320 billion in 2024, up by more 50% since 2020. This is similar to the growth seen in advanced economies (+50%), although trailing China (+75%). The gains primarily come from higher investments in renewable power, now representing half of all power sector investments in these economies. Progress in India, Brazil, parts of Southeast Asia and Africa reflects new policy initiatives, well-managed public tenders, and improved grid infrastructure. Africa’s clean energy investments in 2024, at over USD 40 billion, are nearly double those in 2020.

Yet much more needs to be done. In most cases, this growth comes from a very low base and many of the least-developed economies are being left behind (several face acute problems servicing high levels of debt). In 2024, the share of global clean energy investment in EMDE outside China is expected to remain around 15% of the total. Both in terms of volume and share, this is far below the amounts that are required to ensure full access to modern energy and to meet rising energy demand in a sustainable way.

Power sector investment in solar photovoltaic (PV) technology is projected to exceed USD 500 billion in 2024, surpassing all other generation sources combined. Though growth may moderate slightly in 2024 due to falling PV module prices, solar remains central to the power sector’s transformation. In 2023, each dollar invested in wind and solar PV yielded 2.5 times more energy output than a dollar spent on the same technologies a decade prior.

In 2015, the ratio of clean power to unabated fossil fuel power investments was roughly 2:1. In 2024, this ratio is set to reach 10:1. The rise in solar and wind deployment has driven wholesale prices down in some countries, occasionally below zero, particularly during peak periods of wind and solar generation. This lowers the potential for spot market earnings for producers and highlights the need for complementary investments in flexibility and storage capacity.

Investments in nuclear power are expected to pick up in 2024, with its share (9%) in clean power investments rising after two consecutive years of decline. Total investment in nuclear is projected to reach USD 80 billion in 2024, nearly double the 2018 level, which was the lowest point in a decade.

Grids have become a bottleneck for energy transitions, but investment is rising. After stagnating around USD 300 billion per year since 2015, spending is expected to hit USD 400 billion in 2024, driven by new policies and funding in Europe, the United States, China, and parts of Latin America. Advanced economies and China account for 80% of global grid spending. Investment in Latin America has almost doubled since 2021, notably in Colombia, Chile, and Brazil, where spending doubled in 2023 alone. However, investment remains worryingly low elsewhere.

Investments in battery storage are ramping up and are set to exceed USD 50 billion in 2024. But spending is highly concentrated. In 2023, for every dollar invested in battery storage in advanced economies and China, only one cent was invested in other EMDE.

Investment in energy efficiency and electrification in buildings and industry has been quite resilient, despite the economic headwinds. But most of the dynamism in the end-use sectors is coming from transport, where investment is set to reach new highs in 2024 (+8% compared to 2023), driven by strong electric vehicle (EV) sales.

The rise in clean energy spending is underpinned by emissions reduction goals, technological gains, energy security imperatives (particularly in the European Union), and an additional strategic element: major economies are deploying new industrial strategies to spur clean energy manufacturing and establish stronger market positions. Such policies can bring local benefits, although gaining a cost-competitive foothold in sectors with ample global capacity like solar PV can be challenging. Policy makers need to balance the costs and benefits of these programmes so that they increase the resilience of clean energy supply chains while maintaining gains from trade.

In the United States, investment in clean energy increases to an estimated more than USD 300 billion in 2024, 1.6 times the 2020 level and well ahead of the amount invested in fossil fuels. The European Union spends USD 370 billion on clean energy today, while China is set to spend almost USD 680 billion in 2024, supported by its large domestic market and rapid growth in the so-called “new three” industries: solar cells, lithium battery production and EV manufacturing.

Overall upstream oil and gas investment in 2024 is set to return to 2017 levels, but companies in the Middle East and Asia now account for a much larger share of the total

Change in upstream oil and gas investment by company type, 2017-2024, newly approved lng projects, led by the united states and qatar, bring a new wave of investment that could boost global lng export capacity by 50%, investment and cumulative capacity in lng liquefaction, 2015-2028, investment in fuel supply remains largely dominated by fossil fuels, although interest in low-emissions fuels is growing fast from a low base.

Upstream oil and gas investment is expected to increase by 7% in 2024 to reach USD 570 billion, following a 9% rise in 2023. This is being led by Middle East and Asian NOCs, which have increased their investments in oil and gas by over 50% since 2017, and which account for almost the entire rise in spending for 2023-2024.

Lower cost inflation means that the headline rise in spending results in an even larger rise in activity, by approximately 25% compared with 2022. Existing fields account for around 40% total oil and gas upstream investment, while another 33% goes to new fields and exploration. The remainder goes to tight oil and shale gas.

Most of the huge influx of cashflows to the oil and gas industry in 2022-2023 was either returned to shareholders, used to buy back shares or to pay down debt; these uses exceeded capital expenditure again in 2023. A surge in profits has also spurred a wave of mergers and acquisitions (M&A), especially among US shale companies, which represented 75% of M&A activity in 2023. Clean energy spending by oil and gas companies grew to around USD 30 billion in 2023 (of which just USD 1.5 billion was by NOCs), but this represents less than 4% of global capital investment on clean energy.

A significant wave of new investment is expected in LNG in the coming years as new liquefaction plants are built, primarily in the United States and Qatar. The concentration of projects looking to start operation in the second half of this decade could increase competition and raise costs for the limited number of specialised contractors in this area. For the moment, the prospect of ample gas supplies has not triggered a major reaction further down the value chain. The amount of new gas-fired power capacity being approved and coming online remains stable at around 50-60 GW per year.

Investment in coal has been rising steadily in recent years, and more than 50 GW of unabated coal-fired power generation was approved in 2023, the most since 2015, and almost all of this was in China.

Investment in low-emissions fuels is only 1.4% of the amount spent on fossil fuels (compared to about 0.5% a decade ago). There are some fast-growing areas. Investments in hydrogen electrolysers have risen to around USD 3 billion per year, although they remain constrained by uncertainty about demand and a lack of reliable offtakers. Investments in sustainable aviation fuels have reached USD 1 billion, while USD 800 million is going to direct air capture projects (a 140% increase from 2023). Some 20 commercial-scale carbon capture utilisation and storage (CCUS) projects in seven countries reached final investment decision (FID) in 2023; according to company announcements, another 110 capture facilities, transport and storage projects could do the same in 2024.

Energy investment decisions are primarily driven and financed by the private sector, but governments have essential direct and indirect roles in shaping capital flows

Sources of investment in the energy sector, average 2018-2023, sources of finance in the energy sector, average 2018-2023, households are emerging as important actors for consumer-facing clean energy investments, highlighting the importance of affordability and access to capital, change in energy investment volume by region and fuel category, 2016 versus 2023, market sentiment around sustainable finance is down from the high point in 2021, with lower levels of sustainable debt issuances and inflows into sustainable funds, sustainable debt issuances, 2020-2023, sustainable fund launches, 2020-2023, energy transitions are reshaping how energy investment decisions are made, and by whom.

This year’s World Energy Investment report contains new analysis on sources of investments and sources of finance, making a clear distinction between those making investment decisions (governments, often via state-owned enterprises (SOEs), private firms and households) and the institutions providing the capital (the public sector, commercial lenders, and development finance institutions) to finance these investments.

Overall, most investments in the energy sector are made by corporates, with firms accounting for the largest share of investments in both the fossil fuel and clean energy sectors. However, there are significant country-by-country variations: half of all energy investments in EMDE are made by governments or SOEs, compared with just 15% in advanced economies. Investments by state-owned enterprises come mainly from national oil companies, notably in the Middle East and Asia where they have risen substantially in recent years, and among some state-owned utilities. The financial sustainability, investment strategies and the ability for SOEs to attract private capital therefore become a central issue for secure and affordable transitions.

The share of total energy investments made or decided by private households (if not necessarily financed by them directly) has doubled from 9% in 2015 to 18% today, thanks to the combined growth in rooftop solar installations, investments in buildings efficiency and electric vehicle purchases. For the moment, these investments are mainly made by wealthier households – and well-designed policies are essential to making clean energy technologies more accessible to all . A comparison shows that households have contributed to more than 40% of the increase in investment in clean energy spending since 2016 – by far the largest share. It was particularly pronounced in advanced economies, where, because of strong policy support, households accounted for nearly 60% of the growth in energy investments.

Three quarters of global energy investments today are funded from private and commercial sources, and around 25% from public finance, and just 1% from national and international development finance institutions (DFIs).

Other financing options for energy transition have faced challenges and are focused on advanced economies. In 2023, sustainable debt issuances exceeded USD 1 trillion for the third consecutive year, but were still 25% below their 2021 peak, as rising coupon rates dampened issuers’ borrowing appetite. Market sentiment for sustainable finance is wavering, with flows to ESG funds decreasing in 2023, due to potential higher returns elsewhere and credibility concerns. Transition finance is emerging to mobilise capital for high-emitting sectors, but greater harmonisation and credible standards are required for these instruments to reach scale.

A secure and affordable transitioning away from fossil fuels requires a major rebalancing of investments

Investment change in 2023-2024, and additional average annual change in investment in the net zero scenario, 2023-2030, a doubling of investments to triple renewables capacity and a tripling of spending to double efficiency: a steep hill needs climbing to keep 1.5°c within reach, investments in renewables, grids and battery storage in the net zero emissions by 2050 scenario, historical versus 2030, investments in end-use sectors in the net zero emissions by 2050 scenario, historical versus 2030, meeting cop28 goals requires a doubling of clean energy investment by 2030 worldwide, and a quadrupling in emde outside china, investments in renewables, grids, batteries and end use in the net zero emissions by 2050 scenario, 2024 and 2030, mobilising additional, affordable financing is the key to a safer and more sustainable future, breakdown of dfi financing by instrument, currency, technology and region, average 2019-2022, much greater efforts are needed to get on track to meet energy & climate goals, including those agreed at cop28.

Today’s investment trends are not aligned with the levels necessary for the world to have a chance of limiting global warming to 1.5°C above pre-industrial levels and to achieve the interim goals agreed at COP28. The current momentum behind renewable power is impressive, and if the current spending trend continues, it would cover approximately two-thirds of the total investment needed to triple renewable capacity by 2030. But an extra USD 500 billion per year is required in the IEA’s Net Zero Emissions by 2050 Scenario (NZE Scenario) to fill the gap completely (including spending for grids and battery storage). This equates to a doubling of current annual spending on renewable power generation, grids, and storage in 2030, in order to triple renewable capacity.

The goal of doubling the pace of energy efficiency improvement requires an even greater additional effort. While investment in the electrification of transport is relatively strong and brings important efficiency gains, investment in other efficiency measures – notably building retrofits – is well below where it needs to be: efficiency investments in buildings fell in 2023 and are expected to decline further in 2024. A tripling in the current annual rate of spending on efficiency and electrification – to about USD 1.9 trillion in 2030 – is needed to double the rate of energy efficiency improvements.

Anticipated oil and gas investment in 2024 is broadly in line with the level of investment required in 2030 in the Stated Policies Scenario, a scenario which sees oil and natural gas demand levelling off before 2030. However, global spare oil production capacity is already close to 6 million barrels per day (excluding Iran and Russia) and there is a shift expected in the coming years towards a buyers’ market for LNG. Against this backdrop, the risk of over-investment would be strong if the world moves swiftly to meet the net zero pledges and climate goals in the Announced Pledges Scenario (APS) and the NZE Scenario.

The NZE Scenario sees a major rebalancing of investments in fuel supply, away from fossil fuels and towards low-emissions fuels, such as bioenergy and low-emissions hydrogen, as well as CCUS. Achieving net zero emissions globally by 2050 would mean annual investment in oil, gas, and coal falls by more than half, from just over USD 1 trillion in 2024 to below USD 450 billion per year in 2030, while spending on low-emissions fuels increases tenfold, to about USD 200 billion in 2030 from just under USD 20 billion today.

The required increase in clean energy investments in the NZE Scenario is particularly steep in many emerging and developing economies. The cost of capital remains one of the largest barriers to investment in clean energy projects and infrastructure in many EMDE, with financing costs at least twice as high as in advanced economies as well as China. Macroeconomic and country-specific factors are the major contributors to the high cost of capital for clean energy projects, but so, too, are risks specific to the energy sector. Alongside actions by national policy makers, enhanced support from DFIs can play a major role in lowering financing costs and bringing in much larger volumes of private capital.

Targeted concessional support is particularly important for the least-developed countries that will otherwise struggle to access adequate capital. Our analysis shows cumulative financing for energy projects by DFIs was USD 470 billion between 2013 and 2021, with China-based DFIs accounting for slightly over half of the total. There was a significant reduction in financing for fossil fuel projects over this period, largely because of reduced Chinese support. However, this was not accompanied by a surge in support for clean energy projects. DFI support was provided almost exclusively (more than 90%) as debt (not all concessional) with only about 3% reported as equity financing and about 6% as grants. This debt was provided in hard currency or in the currency of donors, with almost no local-currency financing being reported.

The lack of local-currency lending pushes up borrowing costs and in many cases is the primary reason behind the much higher cost of capital in EMDE compared to advanced economies. High hedging costs often make this financing unaffordable to many of the least-developed countries and raises questions of debt sustainability. More attention is needed from DFIs to focus interventions on project de-risking that can mobilise much higher multiples of private capital.

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German Budget Woes Scupper Full Buyout of Tennet Power Grid

Chancellor Olaf Scholz’s ruling coalition ditched a plan to buy the entire German unit of Tennet Holding BV’s power grid, after the cost proved too much for the government’s stretched finances.

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(Bloomberg) — Chancellor Olaf Scholz’s ruling coalition ditched a plan to buy the entire German unit of Tennet Holding BV’s power grid, after the cost proved too much for the government’s stretched finances.

German Budget Woes Scupper Full Buyout of Tennet Power Grid Back to video

Discussions on a full sale by the Dutch state-owned grid operator to German development bank KfW have ended after more than a year of negotiations, Tennet said Thursday in a statement.

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The government in Berlin had hoped the deal would mark a first step in consolidating the country’s four power grids and accelerating the energy transition, as it needs massive investments to link offshore wind power produced in the north with its industrial heartland in the south.

But after years of crisis firefighting, policymakers are facing constraints on spending, with the deal at one point said to be valued at around €22 billion ($23.6 billion). Late last year, a court ruling on off-budget funds forced the government to recalibrate its fiscal plans, exacerbating the squeeze and leading to significant delays in the talks on the Tennet stake.

“I regret that it was not possible to merge these four transmission system operators into one company, as this would have ultimately made electricity in Germany cheaper,” Economy Minister Robert Habeck told reporters Thursday during a visit to South Korea. “That doesn’t mean that we shouldn’t start working on another solution immediately.”

Philipp Nimmermann, one of Habeck’s deputies, said that given Tennet Germany’s “important role in the energy transition,” the government is still interested in a “strategic minority stake” as part of a consortium.

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“We therefore remain in close dialog with the Dutch government,” Nimmermann said in a statement distributed by the ministry.

Tennet had been exploring alternative plans to offload its German operations in case the deal fell through. Last month, it said a sale to private investors or an initial public offering were among options. The Dutch government had given Germany a deadline of July 1 for the purchase, and officials from both countries met on Wednesday.

Tennet said it remains fully committed to executing its large investment plans in both countries, backed by the Dutch state.

“The federal government of Germany has informed the Dutch state that it cannot deliver on the planned transaction due to budgetary challenges,” according to the company’s statement. “The German government is committed to support such alternative solutions.”

The failed sale leaves the Netherlands with a €1.6 billion hole in its 2024 budget, Dutch Finance Minister Steven van Weyenberg said in a letter to parliament. An additional solution is needed for Tennet’s short-term financing needs until an alternative is found, he added.

The purchase was contested domestically for months within Scholz’s fractious three-party coalition, with Habeck of the Greens, who is also vice chancellor, pushing for a full purchase of the grid.

While the deal wouldn’t have been reflected in Germany’s federal budget per se — the coalition had agreed to finance the purchase via loans from KfW — the parties couldn’t agree on which ministry will take over the repayments.

With tense budget talks for 2025 ongoing, the pro-business Free Democrats feared that a purchase of the Tennet grid would not go down well with voters who expect the party to stick to its course of strict fiscal austerity.

—With assistance from Wout Vergauwen, Diederik Baazil, Kamil Kowalcze, Cagan Koc, Eyk Henning and Christoph Rauwald.

(Updates with German deputy minister starting in sixth paragraph)

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