2011. UK Power Networks. All rights reserved

Consulting on our Business Plan

‘Critical Friends’ Stakeholder Panel

Session 2

29 November 2012

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Safety and Housekeeping

• No planned fire alarms

• Emergency exits

• Fire assembly points

• Toilets

• Mobile phones

• Disclosure - we intend to record our findings and publish a report and our actions - Data Protection Consent

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AGENDA

Panel Session 1 Agenda - CompletedIntroduction: Vision and valuesLow carbon economy – our path to innovationOverview of the RIIO regulatory frameworkNetwork reliability and quality of supply

Panel Session 2 AgendaNetwork investment summaryLow carbon challenge: Responding through innovationSocial obligations and the environment

Panel Session 3 AgendaPublic and staff safetyCustomer serviceConnections

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TODAY’S AGENDA09.30 – 09.40 INTRODUCTIONS

09.40 – 10.00 LOW CARBON CHALLENGES & OUR INNOVATIVE SOLUTIONS

10.00 – 10.40 OPEN DISCUSSION – OUR INNOVATIVE SOLUTIONS

10.40 – 10.55 COFFEE BREAK

10.55 – 11.15 UNDERSTANDING THE SOUTH EAST’S INVESTMENT PLAN

11.15 – 11.55 OPEN DISCUSSION – NETWORK INVESTMENT PLANNING

11.55 – 12.15 OUR SOCIAL OBLIGATIONS & ENVIRONMENT

12.15 – 12.55 OPEN DISCUSSION – SOCIAL RESPONSIBILITIES

12.55 – 13.00 OPEN FORUM

13.00 LUNCH

How the Stakeholder Panel Engagement Works?

BusinessInvestment

Planning

Panel Session 1

Panel Session 2

PanelSession 3

Issues & operational

plans to test

PreviousEngagement

To determine outputs for our Business Plan

-On line-Expert Panels-Consumer Focus Groups-Work shops & seminars

UKPN Feedback Session 4

Report 1

Report 2

Report 3

Business PlanImpact ?

Next PanelSession

Feed into businessplan project

team

Acted upon as Business As Usual

(BAU)

Yes

No

Update /Feedback on Actions

Stakeholder Issues for

New Agenda

5

6

Summary of Your Engagement So Far…

• Interim Report Issued for SPN – Consolidated to follow

• DSO Concept – Low carbon projections

• Low Carbon London and investment plan

• Vulnerable Customers / Fuel Poverty

• Metal Theft

• Distributed Generation and Connections

• General Customer Service issues

• Past engagement information

LOW CARBON CHALLENGE: RESPONDING THROUGH INNOVATION

Martin WilcoxTechnology Innovation & Standards Manager

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The goals of the low carbon economyContext: UK Energy Policy and ‘The Carbon Plan’

Reduction of UK’s green house gas emissions

- 30% energy from renewable resources by 2020- Decarbonisation of electricity production (longer term)- Electrification of heat and transport

Security of UK’s energy supply

- Increasing electricity generation from low carbon and renewable sources- Reducing reliance on imported fossil fuels- Ensuring security and stability of energy resources

Strong UK Low Carbon Economy

- Becoming a low carbon technology world leader- Generating ‘green’ jobs- Exportable expertise

Affordability of UK Low Carbon Transition

- Depends critically on developing an efficient end-to-end electricity supply system- Optimising investment in new transmission and distribution network capacity- Minimising need for additional generation capacity (esp. low efficiency peaking plant)

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9

Challenges

Variable and decentralised low carbon electricity generationElectrification of heat and transport

Variability of wind and solar generation output

Increasing electricity usage to power electric vehicles and heat

pumps

Increased difficulty in real-

time system balancing of

generation and demand

Increased electricity spot price volatility

and commercial imbalance risk

Potential for low carbon technologies to

increase peak demand disproportionally to (higher) levels of

electricity consumption

Will consumers respond to price signals (through smart meters) or permit some external control over

their low carbon appliances in order to control peak demand

and/or balance demand with low carbon generation availability?

We can no longer assume abundance of generation to meet demand spikes in real timeNew paradigm of demand following generation (rather than vice versa)

The challenge for the electricity industry

Challenges

The challenge for electricity networks

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Evolving role of Distribution Network Operators (DNOs)Facilitating the move to a low carbon energy sector in a cost-effective way

Distribution networks will require significant adaptation to

accommodate local renewable generation, heat pumps and

electric vehicles

DNOs might need to evolve from passive to active network

managers – embracing new technologies and engaging with consumers while playing a wider

system balancing role

Smart grid technologies can enhance network

performance whilst increasing

capacity headroom

Technological and commercial

innovation is the key to ensuring future

cost-effective network capability

and flexibility

A well developed and focused innovation

strategy is a precursor to being able to

develop and deploy the right solutions at

the right time

DNOs will need to adapt and evolve their current practices in order to be able to respond to a

range of credible low carbon scenarios in ED1 whilst preparing for even greater challenges in ED2

Responding through innovation

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 ‐

 200.00

 400.00

 600.00

 800.00

 1,000.00

 1,200.00

 1,400.00

 1,600.00

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

Num

ber o

f heat p

umps con

nected

Heat pumps per 100 feeders: South East / Rural

New build housingestate (M)

Terraced Street (H)

Rural village(overhead)(L)

Rural village(underground) (L)

Rural farmstead /small holdings (VL)

The challenge for electricity networks example – heat pumps

• Strong predisposition towards heat electrification across UKPN’s licence areas

• Particularly in the EPN and SPN rural areas

• Under both DECC current ‘high’ and ‘medium’ 4th Carbon Budget scenarios

• Potential challenges are peak demand and voltage management

• Especially on ‘light’ rural networks

Source: Element Energy

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The challenge for electricity networks forecast PV and EV penetration levels

EVs in Service 000

s

EVs in Service 000

s

SOME EXAMPLES OF RELEVANT UK POWER NETWORKS INNOVATION

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Low Carbon London (LCNF Tier 2 project) Commercial innovation to facilitate low carbon technologies

5,000 smart metersmeasuring the impact

of low carbon technologiesand time-of-use tariffs

Contractswith commercial

consumers and generatorsto reduce need fornetwork investment

Trial new tariffs to see how effectively they can impact consumers’ energy demand behaviour

Wind Following Tariffs

Distributed Generation

Electric Vehicles and Heat Pumps Smart Meters Demand Side

Response

Supporting The Carbon Plan by improving network utilisation and enabling the economic accommodation of low carbon technologies Supporting The Carbon Plan by improving network utilisation and

enabling the economic accommodation of low carbon technologies

Low Carbon LondonEngaging with consumers to explore

the potential for demand side managementand network support services to control the

peak demand impact of low carbontechnologies and reduce the need

for network investment

Ascertain scope for commercial demand response contracts and distributed generation to provide network support

Use smart metering to determine impact of new low carbon technologies (electric vehicles, micro-generation and heat pumps)

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Flexible Plug & Play (LCNF Tier 2 project) Integrating commercial scale renewable generation

Leveraging typicalcapacity factors

for renewable generation to optimise network

investment

Applying smart technologyto release additional

network capacity throughactive management

Internet protocol (IEC 61850) telecommunications to enable real-time monitoring and control of generation and network

State-of-art ICT(IEC 61850)

Dynamic Line Ratings

Active Network Management

Active Constraint Management

Quadrature Booster

Supporting The Carbon Plan by radically improving the economic viability of commercial scale renewable and low carbon generation Supporting The Carbon Plan by radically improving the economic viability of commercial scale renewable and low carbon generation

Flexible Plug & PlayMinimising connection costs

and time to connect for commercialscale renewable / low carbon generationby using smart technologies and export

constraint contracts to maximisenetwork capacity and utilisation

Engagement with developers connecting to a generator-dominated network to agree innovative connection contracts

Increase network capacity and relieve constraints through smart technologies and active network management

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Smarter Network Storage (LCNF Tier 2 project) Leveraging whole-system benefits of electricity storage

Alternative topotentially disruptive networkinvestment (new 33kV circuit

and transformer) at amajor substation

Providingsystem balancing

services to help manage the Impact of variable renewable

generation

6MW / 10MWh Li Ion battery with power electronics based AC/DC/AC conversion providing ‘instantaneous’ power

Power Factor Control

Lithium Ion Technology

Power Electronics

Voltage Source Converter

Ancillary Services

Supporting The Carbon Plan by exploiting both the local network and wider system benefits of grid-scale electrical energy storage Supporting The Carbon Plan by exploiting both the local network and wider system benefits of grid-scale electrical energy storage

Smarter Network StorageLeveraging synergies for energy

storage to provide upstream balancingservices (Frequency Response and STOR)as well as local network support to create

revenue streams and hence increasevalue of investment

Exploiting ‘upstream’ opportunities to extract full value from the investment

Innovative solution to address increasing load growth at a major substation (avoiding need for major network reinforcement)

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IMPLICATIONS FOR UK POWER NETWORKS STRATEGIC DIRECTION

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Strategic direction

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Distribution Network Operator

Non-flexible demand

Non-flexibleDG

Distribution System Operator

EVs

Heat

pumps

Cooling

Flexible Demand

Present (fit and forget) - Passive

Possible Future (fit and flex) - Active

Non-regulated

Ancillary Services

Enabling Infrastructure

Com

mercial

Aggregation

Technical Aggregation

Sm

art appliances

Storage

Dispatchable Resources

Netw

ork Storage

DG

Contracts

Dem

and R

esponse

It is evident from the above that maintaining a traditional passive approach to network

management would result in missed opportunities for exploiting the flexibility of low carbon demand and generation, and result in higher levels of network capacity investment

By using smart technologies to more actively manage the network, whilst engaging with consumers and generators to exploit the

flexibility of electric vehicles, heat pumps and low carbon generation, the need for

investment in traditional network reinforcement could be significantly reduced

Moreover, by exploiting the synergies of flexible demand, generation and energy storage to deliver both local network and

‘upstream’ benefits, the opportunity exists to provide system support services such as

STOR and Frequency Response and hence help control whole-system costs

Through becoming a ‘system’ operator, UK Power Networks could help reduce whole system costs Through becoming a ‘system’ operator, UK Power Networks could help reduce whole system costs

Open Forum - Role of Innovation and the DSOIt seems clear that if our national targets for reducing green house gas emissions are to be met, electricity distribution networks, and our management of them, will need to change radically; however:

1)Given that our forecasts are based on Government (4th carbon budget) scenarios do you agree that we should incorporate them into our network load forecasts and ultimately our ED1 business plan?

2)Do you agree that technologically and commercially innovative solutions (such as the examples you have seen today) should be further developed and incorporated into our ED1 business plan?

3)To what extent (and how quickly) should we displace proven conventional network solutions with ‘smart’ alternatives which have yet to reach full maturity but promise in the longer term to be more cost-effective?

4)Do you feel that we should engage more directly with consumers and generation developers in order to raise awareness of the network impact of low carbon technologies and seek solutions that involve consumer / generation participation?

5)Do you regard the transition from ‘network’ to ‘system’ operator as a likely / inevitable consequence of our need to respond to the low carbon challenge (if so how soon should that transition occur)?

6)Do you believe it is the role of individual DNOs to provide innovative solutions for their network or would you prefer a centralised laboratory performing this role? 19

UNDERSTANDING THE SOUTH EAST’S INVESTMENT PLAN

Robert Kemp,Head of System Development

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Facts and Figures For SPN

Within the SPN area we have:

• 83 Grid Sites, 379 Primary Sites & 20,786 Secondary substations

• 52,069 Link Boxes• Underground Cable Network consists of:

– 384km at 132kV

– 1,341km at EHV

– 12,031km at HV

– 26,056km at LV

Facts and Figures For SPN (Cont.)

• Overhead Distribution Network consists of:

– 1,161km of 132kV conductor supported by 2,656 Towers and Poles

– 1,218km of EHV conductor supported by 12,400 Towers and Poles

– 5,587km of HV conductor supported by 68,229 Poles

– 4,543km of LV conductor supported by 126,819 Poles

Costs

For SPN, current UCI’s indicate:• Average cost of an EHV Transformer scheme is

£1,580,694

• Average cost of an EHV switchboard scheme is £146,355 and an HV switchboard scheme is £102,500

• Average cost of laying 1km of EHV cable is £338,164 and 1km of HV cable is £128,357

• Average cost of a Link box replacement is £4,704

• Average cost of establishing a New Grid Site (which includes procuring land) is £15M

NAMP Network Asset Management Plan

• This plan includes all of the proposed works for UK Power Networks

• This is split into– Capital (CAPEX)– Operational (OPEX)

Capital Expenditure

• Asset Replacement

• Reinforcement

• Q.O.S. (Quality of Supply)

• Resilience

• Fault Level

• Other categories, Flooding, Security, A.O.N.B (Areas of Outstanding Natural Beauty)

Asset Replacement

HI Health Indices• measure the condition of assets to understand their probability of

failure

• calculated at the beginning of ED1 based on asset age, duty, environment, defect and condition data

• The Health Indices are also calculated at the end of ED1, based on a deterioration model. Rate of deterioration is influenced by many factors, a couple of examples are:– proximity to coast (coastal assets are more likely to deteriorate

quicker than inland assets), – the expected life of particular makes and models of assets

• HI’s are dynamic and are continually assessed as part of our business as usual processes.

DPCR 5 (2010-15) HI points target: Actual vs Forecast

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ED1 start and finish HIs

• Planning Load Estimates (PLEs), an annual process taking actual load used by the Primary & Grid Substations.

• Regional Development plans – Local authorities – Distributed Generation acceptance

• This results in Load Indices (LI’s)• Engineering Recommendations – P2/6 is a national

standard.• If substations cannot meet the P2/6 Standard then

derogations from Ofgem need to be agreed.

Asset ReinforcementLI Load Indices

SPN LI Status

2012 - All Voltage Level Totals

DPCR5 Start

2010/11 2011/12 2014/15 2014/15 2023/24 * 2023/24 *

Actual Actual Forecast DPCR5 Target

With Investment

Without Investment

91 LI1 Totals 115 131 116 107

79 LI2 Totals 67 87 85 84

56 LI3 Totals 66 42 60 54

44 LI4 Totals 31 29 21 3340 90

14 LI5 Totals 10 3 10 7

284 289 292 292 285

* Forecast data from Strategy and Regulation as at October 2012

SPN Load Index 4/5 Showing glide paths and position as at Sept. 2012

SPN – LRE Demand Profiles

1) Delivery lead times for infrastructure schemes typically exceed customer development timescales. What is your experience?

2) Suitable new sites for substations are increasing difficult to find. What incentives should UK Power Networks offer stakeholders to help encourage planning consents?

Open Forum – Network Investment

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SOCIAL OBLIGATIONS & ENVIRONMENT

Clive Steed,Environment, Sustainability & Public Safety Manager

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Current UKPN Internal Sustainability Initiatives

• 32 initiatives (and increasing)

• Evident throughout UK Power Networks in each Directorate

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Public Safety

• Preserving Life• Direct (offenders)• Indirect (General Public)

• Reducing Outages• Improving Quality of Supply

• Saving Money• Proactive in stopping incidents before they occur

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2011. UK Power Networks. All rights reserved

OFGEM BCF 2012 Submission

Business Carbon Footprint

• Building energy useReduced across all three licences through property rationalisation and energy saving measures

• Operational TransportReduced through fleet rationalisation, GPS scheduling, vehicle procurement and improved contractor reporting

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2011. UK Power Networks. All rights reserved

• Business Transport– Reduced through better reporting, fleet downsizing, low CO2 car

cash allowance. – Increase in rail usage

• Fuel Combustion– This represents temporary generation and has increased as a

function of increasing quality of supply

• Fugitive emissions– Have increased through better reporting of top ups and through

the increase in population of SF6 switchgear

OFGEM BCF 2012 Submission contd

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Green Rhino Technology

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New Bunding Technology

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Street works recycling

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Contaminated Land

Historical • Risk based approach to

assessing existing sites

• Desk top studies undertaken

• 25 sites targeted for possible remediation

New technology trials

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2011. UK Power Networks. All rights reserved

Environmental

• Noise Complaints

- Working with Salford University on low frequency noise (100Hz)

- New design of anti-vibration pads installed

- Cleared & resolved historical case history

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2011. UK Power Networks. All rights reserved

Environmental & Sustainability Issues

• Ban of Creosote

• FFC

• Noise & EMF issues

• Oil as hazardous waste

• Unknown position in BCF

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Corporate Social Responsibility

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Community Investment Funds

Volunteering

Conservation

Supporting Vulnerable Customers

Charitable Donations

Street Works

Dedicated budget supporting projects in community groups and charities

Employees can volunteer work time to support a charity or the local community

Employees take part in practical conservation activities at Wildlife Trusts

Addressing Fuel Poverty and partnering with British Red Cross

Allows employees to donate tax free through payroll through CAF

Investing in IT & Customer Service systems to minimise disruptions

Open Forum – Environment and Social Obligations

1) To what degree do you believe it is the role of UK Power Networks to educate children and the general public to the dangers of our networks?

2) Are UK Power Networks doing enough to fulfil their role as a responsible corporate citizen?

3) Are our initiatives to reduce the impact of our business on the environment sufficient? Where should we focus more effort?

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Next Steps

• Your views will be consolidated and the report will be published on our website

• We will write to you to explain what we have done to include your views in our Business Plan

• We will organise follow-up meetings to discuss with you additional areas of interests that you have raised that are not covered in our three panels

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Before we finish

• Please complete your feedback form

• Please consider sending us an email with:– Additional thoughts after the event– Encourage a colleague to do so

Stakeholder.Engagement@ukpowernetworks.co.ukTel: 07875 113061

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Thank you for your contributions.

Please have a safe journey home.