Current and future developments
In addition to the current and future developments described here, the following developments are relevant to the Transmission business.
Security of supply and climate change
The decline of the UK’s North Sea gas reserves and the transition to a low carbon economy, are the two long-term security of supply and environmental challenges we are focused on. We are working with the UK electricity generators and Ofgem to ensure that the connection of renewable generation to the transmission network can be facilitated quickly and within our current licencing framework. In the US, we have major projects under way to increase the capacity of the transmission system to meet future demand. We are also working with the US Government and regulatory bodies to ensure that we help facilitate the implementation of the new climate change initiatives and stimulus package.
Other UK developments
The price controls contain allowances for transmission reinforcement works to accommodate the growing impact of renewable energy from Scotland. Works to upgrade the two double circuits connecting Scotland and England are under way and due for completion in 2010 at a total cost of around £110 million. Further works are being carried out to increase the capability of the transmission system in the northeast and northwest of England so that increased transfers from Scotland can be transported to demand centres in England and Wales. The further works will be completed in 2011 at a total cost of around £230 million.
At this time, network access is being sought by approximately 9 GW of renewable generation projects in Scotland consisting of just over 100 projects, each with connection agreements with National Grid. For England and Wales, connection offers have been made to an additional 8 GW of renewable generation projects. We have continued to work closely with the Scottish transmission companies to find innovative solutions to advancing new generation projects in Scotland. We have introduced measures to allow generators who are ready and able to connect to do so before wider reinforcement works. Importantly, on 8 May 2009, Ofgem confirmed that they will agree derogations from the GB Security and Quality Standards of Supply to advance the connection of 450 MW of Scottish renewable generation.
We continue to develop a strategic plan for our networks up to 2050, recognising the unique role they play in meeting the UK’s climate change objectives. In respect of electricity transmission, our plan is aligned with meeting the UK’s 2020 renewables target and remaining on the trajectory towards the 2050 greenhouse gas reduction target. Comprising £4.7 billion of mainly onshore strategic infrastructure investment, this plan has been shared with and is supported by the multi agency Electricity Networks Strategy Group. It facilitates the connection of up to 34 GW of new renewable wind generation. These new connections will occur alongside an unprecedented replacement of the ageing generation fleet.
A network incorporating variable and potentially large and inflexible generators will be challenging to operate. We are a leading member of a cross-industry working group considering these issues and we are consulting the industry on the future requirements for balancing services.
US regulatory developments
In New England, incentives applicable to transmission investments in service after 31 December 2008 require a separate petition filing with the FERC. On 17 September 2008, we and Northeast Utilities jointly filed a petition with the FERC to recover financial incentives for the New England East-West Solution (NEEWS) project, a series of interrelated transmission upgrades in the tri-state area of Connecticut, Massachusetts and Rhode Island, in which National Grid will invest approximately $0.6 billion (approximately £0.4 billion). The FERC granted incentives returns for NEEWS in November 2008.
We are seeking improvements to the New York regional planning process, and are working with the New York Independent System Operator (NYISO) and the New York Public Service Commission (NYPSC) to achieve this. The New York transmission owners are conducting a joint study to identify improvements needed to address ageing transmission infrastructure and the integration of renewables.
As permitted under our rate plan, in December 2007 we petitioned the NYPSC for deferred recovery of incremental investment on major capital programmes for calendar year 2008. The NYPSC issued its order on our deferral petition in September 2008 that recognised that the total programme of investment could be considered incremental to the existing rate plan but required us to file an additional petition based upon our actual 2008 investments after the end of the calendar year. This supplemental petition was filed on 21 April 2009. We anticipate that we will also petition for deferred recovery of qualifying incremental investment for calendar years 2009 and 2010.