www.ssen-transmission.co.uk A Network for Net Zero RIIO-T2 Draft Business Plan October 2019 Scottish Hydro Electric Transmission plc 2 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 3 Foreword Welcome to this second 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 published our first draft Business Plan for consultation on 27 June this year, the same day that the UK Government committed to a Net Zero target, requiring the UK to bring greenhouse gas emissions to net zero by 2050. As the transmission network owner in the north of Scotland, I strongly believe we have a critical role to play in delivering Net Zero ambitions for the UK and Scotland, with our plan designed with the flexibility to deliver pathways to Net Zero. 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 our draft Plan to facilitate the connection of at least a further 3 GW of renewable generation with our likely outturn forecasting a further 2.4 GW. This would provide enough renewable energy to power 10 million British homes and make a material contribution to the UK’s international commitments under the 2016 Paris Agreement. This ambition has been welcomed by our stakeholders. As the first network operator to publish our full Business Plan, and the only network company to run a full consultation on the draft Business Plan, stakeholders have strongly welcomed our accessible, transparent, collaborative and democratised approach. The results of our consultation have confirmed that stakeholders are overwhelmingly supportive of our RIIO-T2 plans. 89% of stakeholders who attended our consultation roadshows responded that our Five Goals (shown on the page opposite) are the right priority areas for our business and are suitably ambitious. 87% think that the cost to consumers of delivering our Core View of investments is affordable. And 80% agree with our approach to investment and the certain view. This positive response from stakeholders was made possible through the extensive engagement undertaken in developing the plan. Co-creating our goals, ambitions and approaches with stakeholders has ensured that this is a stakeholder led Business Plan, set to deliver what matters most to our stakeholders. Throughout our recent consultation stakeholders have raised some challenges on the draft Business Plan which we are working to address in our final Business Plan that will be submitted in December. This includes challenge on whether setting a 100% target for reliability is efficient, and the need for us to work ever closer with our supply chain as we deliver the scale of investment mapped out in the Plan. Other common asks from stakeholders related to additional information on certain aspects of our plan including: our pathway to net zero, our approach to asset management and our proposals on outputs and incentives. We have provided this additional information alongside this second draft Business Plan. As we prepare for the submission of our final Business Plan in December we are adding more detail to our ambitious programmes and targets for, amongst other things, network reliability and availability, the role of stakeholders in shaping our activities, reducing our own greenhouse gas emissions and achieving ‘Net Gain’ biodiversity outcomes. I am already seeing these ambitions feed through into our day to day activities within the business and look forward to finalising these plans in December. Rob McDonald Managing Director Scottish Hydro Electric Transmission www.ssen-transmission.co.uk 4 About us 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 Aberdeen and cities. Fort William Dalmally Perth Kincardine Denny Kintyre Hunterston Scottish Power Arran Energy Networks Ofgem has continued to publish updates to the Business Plan Guidance on RIIO-T2 business plans throughout September. Further regulatory directions and updates to the Business Plan Guidance are still expected. Our assurance and governance requirements have meant that we are not fully able to take account of Ofgem’s latest guidance in this draft Business Plan. We are considering the detail of Ofgem’s additional guidance and will ensure that our final RIIO-T2 Business Plan in December 2019 takes full account of Ofgem’s decision and further planned regulatory directions (including updates to the Business Plan Guidance). www.ssen-transmission.co.uk 5 Contents Introduction, consultation and summary 06-17 Section 1: About the Energy Industry and our Role 18-44 - 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 - Competition - How this draft Business Plan has been developed - Governance and assurance Section 2: A Stakeholder-Led Strategy 45-73 - 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 74-103 - 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 104-139 - 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 140-174 - 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 175-199 - Determining our allowed revenue - Determining the cost to customers www.ssen-transmission.co.uk Note, all financial values shown in this consultation are in 2018/19 prices unless stated otherwise 6 Introduction Introduction In December 2019 we will submit our full and final business plan for the RIIO-T2 period, A Network for Net Zero. In June 2019 we published a first draft of our Business Plan as a consultation to provide an opportunity for stakeholders to review the full Business Plan package and to challenge our proposals. Our final Business Plan will include changes in response to the challenges received from stakeholders through this consultation, from our User Group and from the RIIO-2 Challenge Group. Further Business Plan Guidance has also been provided by Ofgem throughout September, with further regulatory directions and updates to the Business Plan Guidance expected. This will require further changes and additions which will be applied in the final Business Plan. This second draft Business Plan sets out how the changes proposed in response to stakeholder feedback, and the changes and additional information required to respond to the Business Plan Guidance, will be accommodated in our final Business Plan in December. This second