www.ssen-transmission.co.uk A Network for Net Zero RIIO-T2 Draft Business Plan June 2019 Scottish Hydro Electric Transmission plc 2 Introduction Five years. Five clear goals Transport the renewable electricity that powers 10 million homes Build electricity network flexibility and infrastructure that can accommodate 10GW renewable generation in the north of Scotland by 2026 100% network reliability for homes and businesses 100% transmission system reliability for homes and businesses by 2026 Every connection delivered on time Provide every network connection, tailored to meet our customers’ needs, on time and on budget One third reduction in our greenhouse gas emissions Reduce the scope 1 and 2 greenhouse gas emissions from our operations by 33% by 2026, consistent with 1.5 degree climate science pathway savings from innovation Through targeted new technology and ways of working, achieve £100 million customer benefits by 2026 Delivered for around £7 a year Introduction 3 Foreword Welcome to this first full draft of our RIIO-T2 Business Plan for the electricity transmission system in the north of Scotland between 1 April 2021 and 31 March 2026. We share this draft Plan for consultation against the background of an ongoing lively debate about the future of the GB energy industry as it goes through transformative change – to decarbonise, digitise and decentralise. We are encouraged by the democratisation of this debate, which we have experienced over the past two years as we have sought views and ideas to develop this draft Plan. In 2010, when we began consulting on our RIIO-T1 Business Plan, there was some scepticism about the scale and pace of decarbonisation that we envisaged. Nearly a decade later that scepticism has all but gone. Most commentators, governments and wider society recognise climate change to be a significant, if not the most significant, threat to our way of life. Just in the last few weeks the Committee on Climate Change has called on the UK to adopt a ‘net zero’ target for greenhouse gas emissions by 2050. As we now look forward to 2026, decarbonisation and the transition to a low carbon economy remains our strategic objective and primary business driver. Our exceptional track record in delivering infrastructure on time and under budget has meant that renewable generation connected in the north of Scotland has more than doubled since 2010. We put forward proposals in this draft Plan to facilitate the connection of at least a further 3 GW of renewable generation. This would provide enough renewable energy to power 10 million GB homes and make a material contribution to the UK’s international commitments under the 2016 Paris Agreement. There is, of course, much more to running an efficient and sustainable transmission network than the timely connection of renewable generation. Our draft Plan includes ambitious programmes and targets for, amongst other things, network reliability and availability, the role of stakeholders in shaping our activities and ‘Net Gain’ biodiversity outcomes. We also include steps to ensure that the capabilities of our organisation keep pace with the growth of the network and GB customers’ expectations. Our ambition for the RIIO-T2 period is captured in Five Goals shown on the opposite page that are designed to set clear, measurable targets on the things that matter most to our stakeholders. We welcome your views on our proposals. We have sought to strike the right balance between the need for expenditure – to decarbonise, modernise and be sustainable – and the cost to the cash-squeezed household. Do you think that we have got this balance right? Is there more, or less, that we should be doing? My team and I will be continuing the conversation about our Business Plan over the summer and autumn, and I hope to speak to many of you directly then. Rob McDonald Managing Director Scottish Hydro Electric Transmission www.ssen-transmission.co.uk 4 Introduction Introduction About us We are Scottish Hydro Electric Transmission (SHE Transmission), part of the SSE Group, responsible for the electricity transmission Key network in the north of Scotland. Existing infrastructure Under construction We operate under the name of Scottish and Southern Electricity Shetland Networks, together with our sister companies, Scottish Hydro Potential development Electric Power Distribution (SHEPD) and Southern Electric Power Distribution (SEPD), who operate the lower voltage distribution networks in the north of Scotland and central southern England. As the Transmission Owner (TO) we maintain and invest in Orkney the high voltage 132kV, 220kV, 275kV and 400kV electricity transmission network in the north of Scotland. Our network Gills Bay consists of underground and subsea cables, overhead lines on Dounreay wooden poles and steel towers, and electricity substations, Spittal extending over a quarter of the UK’s land mass crossing some of Mybster its most challenging terrain. Lairg Western Loch Buidhe Isles (Bonar Bridge) We power our communities by providing a safe and reliable Mossford Moray Firth supply of electricity. We do this by taking the electricity from Beauly Knocknagael Blackhillock generators and transporting it at high voltages over long Peterhead Skye Kintore distances through our transmission network for onwards Tomatin Fort Augustus distribution to homes and businesses in villages, towns and Aberdeen cities. Fort William Dalmally Perth About this consultation Kincardine Denny This document is a full draft of our RIIO-T2 Business Plan. It sets Kintyre out our proposed strategy, ambitions, targets, activities and costs Hunterston for the period 1 April 2021 to 31 March 2026. Scottish Power Arran Energy Networks We publish this draft Plan following two years of consultation with stakeholders across GB. Much of that consultation has been issue-specific, and we recognise there is a desire from our stakeholders to see the complete Plan in one document. We welcome views on any part of this draft Plan. A full list of specific On 24 May 2019, Ofgem consultation questions and details of how to respond can be published its Sector Specific found on page 179-180. Methodology Decision for RIIO-21. We will publish our response to this consultation in October Our assurance and governance requirements have meant 2019 setting out the changes that we propose to make for our that we are not fully able to take account of Ofgem’s final RIIO-T2 Business Plan that we will publish in December decision in the draft Business Plan. We are considering 2019. the detail of Ofgem’s publication and will publish a paper later in the summer setting out our views on the You can find out more about RIIO-T2 on our website: www. regulatory framework and how it might impact upon our ssen-transmission.co.uk/riio-t2-plan proposals. Our final RIIO-T2 Business Plan in December 2019 will take full account of Ofgem’s decision and further planned regulatory directions (including updates to the Business Plan Guidance). www.ssen-transmission.co.uk 1ww.ofgem.gov.uk/network-regulation-riio-model/network-price-controls-2021-riio-2/riio-2-publications-and-consultations Introduction 5 Contents Summary 06-08 Section 1: About the Energy Industry and our Role 09-32 - The future of the energy industry - Our role and our performance during RIIO-T1 - A strategy for GB: objective and themes - Dealing with uncertainty: Future Energy Scenarios - How this draft Business Plan has been developed - Governance and assurance Section 2: A Stakeholder-Led Strategy 33-60 - The case for being stakeholder-led and our experience during RIIO-T1 - Who are our stakeholders? - Our new stakeholder engagement strategy - Our new connections and commercial policy – Our new innovation policy – Building trust Section 3: Safe and Secure Network Operation 61-88 - Being safe - Security of supply - About resilience and improvements we have made during RIIO-T1 - Proposals for reliability - Proposals for redundancy, resistance, response and recovery Section 4: Sector Leading Efficiency 89-122 - Why Sector Leading Efficiency: concerns about the cost of energy - Being efficient - Identifying the need for investment - Identifying the preferred investment option: strategic optioneering - Proposed capital investment during RIIO-T2 - Our capital delivery strategy Section 5: Leadership in Sustainability 123-155 - What is sustainability and our journey to Leadership in Sustainability - Our Sustainability Strategy and Action Plan - Connecting for society Tackling climate change - Promoting the natural environment - Optimising resources - Supporting communities - Growing careers - Transparency and reporting Section 6: Cost to Customers 156-178 - Determining our allowed revenue – Determining the cost to customers Consultation questions 179-180 www.ssen-transmission.co.uk Note, all financial values shown in this consultation are in 2018/19 prices unless stated otherwise 6 Introduction Summary Enabling the transition to a low carbon economy The north of Scotland is rich in renewable energy sources: Figure 1 North of Scotland Future Energy Scenarios (GW) onshore and offshore wind, hydro, wave and tidal. These 20 resources are essential to the national transition to a low carbon economy. 15 The Committee on Climate Change2 report that 75% of UK emissions reductions since 2012 have come from the power sector. Emissions from electricity generation fell by 59% between 10 2008 and 2017, while security of supply was maintained and average energy bills fell. 5 These reductions have occurred disproportionately in Scotland, where grid intensity in 2016 was approximately 55 gCO₂e/kWh3. This contrasts with a full UK grid intensity of around 300 gCO₂e/ 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 kWh. Proactive Decarbonisation Cost Limitation The Committee on Climate Change also report that the UK is Certain View Local Optimisation not on course to meet the legally binding fourth and fifth carbon budgets. The Committee argue that further decarbonisation of Three key proposals in this draft Plan are intended to support the electricity generation and electrification of transport are essential national decarbonisation objective: to getting on track.