Welcome to everyone, and thank you for joining today's webcast. It's great to be here in New York as a sponsor of Climate Week. We passionately believe that all businesses need to stand for more than just profit, and hopefully today we'll demonstrate why responsibility runs deeply through everything we do at National Grid. We have a critical role in enabling both net zero and ensuring the benefits of the energy transition are shared with everyone, and that nobody is left behind. This responsibility is integral to our core strategy and underpins everything we do. To help demonstrate this, I'm pleased to be joined today by two colleagues: Rhian Kelly, our Chief Sustainability Officer, who ensures that we're setting the right goals as a responsible business, and Rudy Wynter, President of our New York business, who, alongside our other presidents, is accountable for making sure that our commitments are delivered.
Later in the webcast, I'll join Rhian, Rudy, and Angela from the IR team for a discussion around some of the key ESG topics investors frequently ask us. We'll also take your live questions. You'll find the question box by clicking on the blue arrow at the bottom of your screen. First, I'd like to spend a few minutes outlining some of the key updates we've made to our Responsible Business Charter, as well as the progress that we've made against our original charter commitments. You can track these in our Responsible Business Report, which we publish each year alongside our annual reports and accounts. Up front in our charter is our commitment to enabling a fair and affordable transition to a clean energy economy and reducing our emissions. I'm pleased with the progress over the last year.
We've achieved a 70% reduction in Scope 1 and 2 emissions versus a 1990 baseline. This represents a 7.5% reduction versus the prior year. We maintained our CDP Climate Change A-list rating for the seventh consecutive year, and our first climate transition plan received a 98% advisory shareholder vote in favor at our 2022 AGM. The plan, which we published last year, sets out the concept of real zero, our aim to achieve zero emissions by 2050 without the use of offsets. We've also made good progress in making sure our economic and social role has the greatest impact on the communities we serve. I'm especially proud of how we stepped up last winter by creating a GBP 65 million energy support fund to help alleviate financial distress caused by rising energy costs. We're returning early GBP 300 million of interconnected income to customers where we've collected revenues above our cap.
We are also delivering over 60,000 community volunteering hours whilst assisting over 6,000 young people with their skills development. We continue to ensure that the principle of responsibility guides us in everything we do. We have now fully integrated our Responsible Business commitments within our performance management frameworks. Last year, our remuneration policy was updated with increased focus on ESG. This includes measures covering reductions in emissions and the enablement of net zero, as well as diversity, equity, and inclusion. Underpinning this progress against our commitments and the vital role that National has at the heart of the energy transition is the record level of investment we made across our networks last year. We invested GBP 7.7 billion in 2022-2023, up a billion pounds on the prior year, with 75% aligned with the EU taxonomy principles.
This makes us one of the FTSE's biggest investors in the delivery of net zero. Now, let me turn to some of the changes we've made to the charter. Since we launched our first Responsible Business Charter three years ago, the external environment has continued to change, and our business has evolved significantly with the repositioning of our portfolio. Now is the right time to publish an updated Responsible Business Charter to reflect these changes. Following engagement with stakeholders, we've refreshed our charter to focus on three core pillars: our environment, our customers and community, and our people, all underpinned by our Responsible Business fundamentals, with previous pillars of economy and governance now embedded within these new focused areas. Let me walk through some of the key updates, starting with the environment.
Our new aim is to reduce Scope 1 and 2 emissions by 60% by 2030 from a 2018-2019 baseline, whilst remaining committed to reducing Scope 3 emissions by 37.5% by 2034. These near-term emission targets across the group align National Grid to a 1.5-degree pathway and have been verified by the Science Based Targets Initiative, or SBTI. We've also updated our emissions reduction ambitions for our supply chain, adding clarity in how we'll target our suppliers to reduce Scope 3 emissions across the company. As I said earlier, our climate transition plan sets out our ambition of real zero by 2050. Alongside this, we continue to work with SBTI with a view to achieving a verified 1.5-degree aligned long-term net zero target. Turning to our second pillar, our customers and communities, we want to support an affordable and a fair energy transition where nobody is left behind.
We will continue to mobilize hardship funds and energy efficiency measures and improve our reporting on the benefits that these initiatives provide. We will continue to provide meaningful skills development for 45,000 people by 2030, with a focus on communities facing socioeconomic disadvantage, and report on the progress of our Grid for Good employability programs. We will deliver over 500,000 hours of volunteering by the same date, and we will enhance our reporting to include customer satisfaction scores across all our key business areas. I know that Rhian will have more to say on this in a few moments. Finally, our third pillar, people, where we are investing to build the skills needed to deliver the clean energy future. Building a diverse, equitable, and inclusive organization that reflects the communities we serve is key to National Grid's success.
Whilst we've made good progress here, we're going a step further with more specific aims. These include achieving a 35% gender diversity and 20% ethnic diversity in our management populations by 2025. This represents a 1.5% and 3% increase respectively compared to today. An aim for 50% female representation and 40% ethnic diversity in our new talent populations by 2025. We'll also aim to lead the industry on well-being, aiming for metrics above the prior year level, and we're committed to making sure pay is equitable for all our colleagues. Underpinning these three pillars is our Responsible Business fundamentals, our commitment to being a responsible business in everything we do, including ensuring safe and reliable operations, living our values, whilst also influencing and expecting the same of our partners and supply chain. As I've set out, there's no shortage of topics to cover.
I will now join Rhian Kelly, our Chief Sustainability Officer, and our New York President, Rudy Wynter, discussing a bit more detail of these areas before we open it up to your questions.
Thanks, John. Good morning, Rhian and Rudy. Looks like we've got a number of questions already coming in on the web, so please do keep them coming. If you'd prefer to ask your question anonymously, there is a box that you can tick to do this. First, I want to spend a few minutes grilling each of you on some of the ESG topics that I get asked about most often from investors. Maybe to start, one of the biggest changes in our refreshed charter is our recent alignment to the 1.5-degree SBTI pathway. Perhaps we start there. Rhian, what operational changes do we need to make at National Grid to meet this?
Thanks, Angela. That's a great question to start with. We've worked really hard to make sure that we've got 1.5 near-term targets across National Grid. We actually did have targets already for some of our U.K. business units, but now we've set it right across the group and also had it validated by SBTI, and I'm delighted and very proud about that. Because we already had it in our U.K. targets and we'd already sort of aligned to some of the plans that we put out to our climate transition plan, which we launched in 2022, actually the targets that we've set today do align with our existing strategy, and that's decarbonizing our electricity network in the U.K. and the U.S. and our gas networks in the U.S. There are no significant changes, really, but there will, of course, be a few tweaks.
Let me give you an example of that. First of all, we'll need to push a bit harder on decarbonizing our gas networks aligned to our clean energy vision, but working closely with our policymakers and our regulators to make sure we get the right policies and regulations in place to make the necessary investments. We'll also need to accelerate some of the emissions reductions in our generation fleet on Long Island. That involves working with the Long Island Power Authority and working with them to meet state goals. We'll need fewer enabling policies to think through renewable natural gas and hydrogen and those opportunities for our generation fleet. We'll also need to deliver on our existing retirement plan for those assets.
Pushing a little bit harder. John, earlier you talked about National Grid's climate transition plan, which sets out our ambition to achieve real zero by 2050. You also said that whilst we've verified near-term targets with SBTI, we're still working with them on trying to verify a longer-term 1.5-degree target. What's preventing us from doing that today?
Yeah, as Rhian said, over the last three years, actually as a group, we've been aligned to SBTI less than two degrees. Actually, some of our operating companies, electricity transmission in the U.K., electricity distribution, have actually aligned to the 1.5-degree accreditation. We've done a huge amount of work to achieve that, so I'm really pleased about that. You saw in my speech that it allows us to set some new targets in terms of Scope 1 and 2, of a 60% reduction against an 2018-2019 baseline and a 37.5% reduction on Scope 3. Putting all that together has allowed us to get accreditation on the SBTI for the short-term 1.5-degree target. Actually, there's no pathway that exists with SBTI at the moment for the gas industry.
Therefore, we need to work with them over the coming months to see how they can develop that pathway to allow us then potentially to look at a long-term target as well.
Good. I'm going to stick with the theme of net zero for a moment longer. Building the infrastructure needed to deliver the energy transition at pace needs some policy change. John, can you talk about what, when you speak to government and policymakers in the U.S. and the U.K., what are you talking to them about?
Yeah, the first thing to say, I think, is that actually what I've noticed over the last 12 months is just an increasing recognition of the scale and the pace of infrastructure that needs to be built. In the U.K., actually in May this year, trying to be helpful as a company, National Grid set out what we called our spring policy document, which identified five areas where we felt government and regulators needed to take action now if we were going to be able to achieve the targets that have been set and deliver the scale of infrastructure. Actually, yesterday, I was quite pleased to see the Prime Minister make some announcements around improving the planning process and the connections process, which are two of the five things we actually had in our spring document because they are key enablers to the infrastructure.
On the U.S. side, very similar, actually, permitting and citing is a really important part of what we need to see put in place. We need to streamline that process in the U.S. We also, on the gas side, for example, need to see a clean gas standard to help us to develop the gas side of the business and our clean energy vision there. There are some key changes that are going to be needed over the next period if we're going to deliver the scale and the pace of infrastructure that's going to be needed over the next sort of 5-10 years.
John, I would just build on that to just add one other item that we're talking about in the U.S., and that is allowing us to do some anticipatory build-out of utility infrastructure. In New York, we've already made some headway with that, where our regulators have allowed us to do some anticipatory build-out for transmission assets to integrate renewables. The next step is looking at what we're going to need for the EV transition. When you drive around in upstate New York, it used to be rare that you'd see an electric vehicle. Now they're everywhere. We have to make sure we're keeping up with the trajectory of EV adoption, but we also have to make sure that customers and businesses have confidence that there will be public charging there when they need it.
To that end, we're speaking with our regulators and policymakers about making sure that we can be allowed to do some anticipatory infrastructure build so that it will be ready, especially on highways, because when you look out into the future, some public charging on highways could see a load that's equivalent to a small town. We have to make sure our networks are ready for that.
Thanks, Rudy. Rhian, I'm going to stay in the political sphere for a moment. We recently provided updates on our approach to lobbying and political engagement. What's changed here?
I should start by saying that, of course, everything we do in terms of our lobbying and advocacy is done responsibly, and that's what we set out in our recent policy statement on this. Of course, there are different definitions of what's responsible lobbying, but we do it appropriately in the places where we're located. As we've talked about, the climate transition plan, the clean energy vision, our delivering for 2030, all of what we do is aligned with these and is in the intention of bringing forward these policies and therefore aligned with our emissions reduction targets of the Paris Agreement and 1.5. The lobbying supports these outcomes. I think we think of it a little bit, we do sort of have different roles in different locations. In the U.K., we're definitely an enabler of the energy transition.
We feel that we're at the heart of the system, and we actually want to work with the government to support their legally binding targets. In the EU, it's a bit more of a partnership approach, particularly through our interconnectors. In the EU, we're both supporting the U.K.'s targets, but also supporting delivery of the EU targets. I think, Rudy, in the US here, it's a bit more about sharing our expertise. It's about leaning into a fair and affordable energy transition and working with our policymakers, our state regulators to make sure that we hit the state goals. With all of this in mind, we are doing a review of our membership and our trade associations, and we're going to publish that by the end of the financial year and be transparent about where we have memberships.
Maybe to follow up on some of our memberships there, there's been a recent push in the U.S. by certain environmental groups for utilities to disavow the American Gas Association, or AGA, as some of the positions that they take have been perceived to be acting against climate policy. What's our own view on this?
Yeah, so I think industry trade associations are actually an extremely useful forum. They allow us to get together with our peers to exchange best practice, share new ideas, spot what's coming down the track, what sort of horizon scanning. They also support colleagues with training opportunities. As you alluded to in the question, we do also use them for influencing. I do think the collective voice of industry has a lot of weight and often more so than individual voices. We want to make sure that all of what we do aligns to the policies and the goals that we've set out. It is true that we might not agree with every single position of every single association that we're part of, but it's the value of being part of that industry conversation that I think is really important.
To your point about the American Gas Association, that is why we do these reviews regularly to look at our trade associations, to look at the value they provide for our operations, for our customers, and how they align to the commitments and targets and policies that we want to see delivered. That is why we are doing the review at the end of the financial year. We will publish the findings, and we will set out the process that we use to think through where there is misalignment with our trade associations, industry associations, and what we are going to do about that.
Thank you. Some more to come. Taking it back to the bigger picture, John, I think most everyone will agree that delivering the energy transition requires an enormous amount of investment in new infrastructure. That also involves a vast supply chain. How are we working with the supply chain to deliver what we need to in a responsible way?
Yeah, great question. I recently had all the CEOs of National Grid's supply chain together at our headquarters to really have the conversation about the energy transition, the pace, and the scale of infrastructure. The common theme that came out of that was what we need from government and from regulators is a clear pathway and ultimately a visible, transparent capital plan that the supply chain can actually respond to. I said we were pleased to see what came from the Prime Minister yesterday in terms of recognizing things like planning, because that will give us more surety in terms of the pace that we need to deliver the infrastructure.
In terms of responsible business in the supply chain, what they are telling me at that level is that actually, if we can give them the visibility and that transparency, then they will invest in the skills that are going to be needed, creating green jobs in important communities. From a responsible business perspective, what we need to see is more transparency, more visibility of what we need to do, and then the supply chain can then invest in those capabilities and create those green jobs.
Great. Rudy, we've just spoken about supply chain engagement. The charter also talks about how we engage with our communities, which is so vitally important here in New York. Can you talk a bit about how the business approaches this year?
Sure, happy to do so. In the US, all of our utilities have a direct relationship with our end-use customers. In New York, in particular, those are 4.2 million customers we have the privilege of serving every day. As a utility, all of our colleagues at National Grid live, work, and play in these communities. These customers are our neighbors. About three years ago, we launched something called Project C in New York. That is our commitment to those communities, where we provide grants to various things like neighborhood beautification, workforce development, sustainability projects in these communities as well. We have to make sure that they are economically vibrant and they are growing. We partnered with so far well over 1,000 not-for-profits across the state of New York. One great example of that is a not-for-profit called Tiny Homes for Good.
What they do is they manufacture and build very small modular homes that are solar-powered, and they're given or leased at a very low rent at a very low rate to low-moderate-income consumers, some of whom might be in danger of being homeless. We partnered with them to make sure we can provide these in some areas where they're needed most. A great example of how the energy transition and helping those who are very challenged in some communities come together. One of the other big focus areas for Project C is workforce development. I'm happy to say that this August, rather, we saw 24 individuals graduate from something called the Clean Energy Academy. These are residents of New York City public housing projects.
We invested with NYCHA, that's a city agency that runs these housing projects, to train these young people on weatherization, doing energy audits, heat pump installation, and maintenance, making sure that we're helping to train the energy workers that we need for the future.
That's great. We have talked about supply chain. We talked about communities. We also have a number of commitments around our own workforce at National Grid, including diversity, equity, and inclusion. How is the business shifting to be more reflective of the communities that we serve?
Yeah, hopefully we've got a chance to read our Responsible Business Charter. In that, we lay out a very simple ambition for National Grid, which is we want to have the people in National Grid be a true reflection of the communities that we work in, whether that's here in New York or whether it's in the Midlands in the U.K. I'm actually really proud of the progress that we've made over the last few years. As I said in my speech, we have, I think it's just under 50% of our senior leadership team are now diverse. We've got further to go, a lot more work to do, actually, over the coming years.
Some of the initiatives that we've been doing, for example, is really looking to attract people from different backgrounds and different areas that haven't historically been interested in actually working in the utility sector. We've got lots of initiatives going on across the business. Why don't I ask Rudy just to give a few that's going on in New York?
Sure. As John mentioned, our long-term goal is to make sure that our employee base mirrors our customer base. What does that look like in New York? In downstate New York, our customer base is about 62% diverse, and our employee base is about 47% diverse. In upstate New York, where our other utility is, our customer base is about 22% diverse, and our employee base is about 10% diverse. Also, as John mentioned, it is really about how do we make sure that everyone from various communities understand the opportunities that we have here at National Grid. As I like to say, you have to see it to be it. You have to know these things exist to then want to strive for them. We do a lot of outreach in the communities. We do ride-alongs. We do tours.
We work with middle schools and high schools and trade organizations to try to attract that diverse skill base that we're going to need to build the energy networks of the future.
I was just going to come in and reference our employee resource groups, which I think are really important in the organization. We have 16 of them, and last year we engaged 7,800 colleagues across the business. I think they are really powerful ways of creating a sense of belonging inside the business and also excellent development opportunities. I mean, we are constantly evolving them. We are constantly listening to colleagues, thinking what we could do differently. I am involved in the Women in National Grid Network. I am a co-sponsor of that in the U.K. We have a Women in Networks here in the U.S., and globally, we have a Women in Nontraditional Roles. We all work together on events around International Women's Day. We have events coming up for International Men's Day. We have also supported the business in some of the awards that we have won.
For example, the Times Top 50 Employer for Women. My final point before we can move on is just around our ERG Summits. We have had two of those, and they have been a highlight of the year and some of the most diverse rooms that I have ever been in. I think we should be quite proud of all that we have achieved. I mean, there is obviously more we can do, but I think the ERG Summit, to me, really made me feel that the sort of progress we have made in the last couple of years.
Absolutely agree. One last question for me before we move to questions from the web. We are in a cost of living crisis. How has that changed our approach to business? I'd love to maybe hear from each of you.
For a start, we talk a lot about being a responsible business, but for me, it's the actions that you take as a business that really demonstrate you are being responsible. When I think back to last autumn, when we saw the cost of living crisis and at the same time higher energy prices, and I looked across both the U.K. and the U.S., actually, we could see that a lot of our customers were struggling. We took some key decisions as a business there. One was to set aside GBP 67 million, GBP 50 million for the U.K. to work with local charities who could make sure that that money got to those people that were most in need, and then GBP 17 million into the U.S. to do the same. On top of that, we have a poor energy fund in our electricity distribution business.
We set aside GBP 2.5 million for that, and that's helped 24,000 families who are described as fuel-poor. You would have seen also that last year we set aside GBP 200 million of revenues we collected from our interconnectors business that we were due to give back to customers, and we decided to give that back early. This year we did another GBP 100 million on top of that, so GBP 300 million in total. These are all actions, I think, that just demonstrate that it's important to us that we are seen as part of the local community, whether it's to support customers as a responsible business, and also that we take everybody along on the journey of the energy transition. Perhaps I'll hand over to Rudy, and he can talk about some of this.
Sure. Sure. In New York, we mirrored pretty much many, many similar things. We have used those funds to, number one, with fuel assistance, helping consumers pay their bills. We also saw that these consumers who were having problems paying their energy bills also had other issues with food insecurity and other things. We have made sure we have linked them up to our network of not-for-profits that we have supported across New York to help them get the help they need there as well. We also gave out just over 30,000 weatherization kits to moderate-income consumers. These are kits that help people caulk their windows and things like that. They are utilizing less energy, and they are keeping their bills down throughout the winter. Finally, I would say our outreach to these communities is not just when times are tough because of high energy bills.
I think back to the end of last winter, there was a terrible ice storm and snowstorm in Buffalo. I'm sure many of you saw it on the news. After that storm was completed, after we restored power to everyone who lost power, we were still there, still helping the community, and we used some of those funds to help our neighbors and our customers in East Buffalo as well.
I was going to give an example from the U.K. because one of our partners has been Citizens Advice. I visited the Citizens Advice center in North Coventry earlier this year, and I had the privilege of sitting in one of their customer meetings. It was really clear the impact that increasing energy costs have on very strained household budgets already. Some of our funding for Citizens Advice has been able to build their capacity, particularly on energy. The conversation I sat in on, the volunteer, and they are all volunteers, was able to help with the energy bill and understanding it, and then also support the client in terms of how do they make the repayments so that they can pay off the debt that they had incurred. They also provided energy efficiency packs, like your weatherization kits here in the U.S.
They may be a slow cooker. They might be energy-efficient light bulbs. They might be the sort of foil that goes down the back of your radiators to save you energy. They were giving these out to people to ensure that they had some options in terms of managing the energy use in their homes. We have also worked with Citizens Advice to put 12 of our colleagues from the U.K. into Citizens Advice as secondments for a year. That builds their capacity, allows them to deliver more. We are hoping that when these colleagues come back, they will help us think differently about what support we provide to our vulnerable customers.
My final example would be something we've done with National Energy Action, working with local community groups, where we have literally supported warmth hubs, which are community centers, church halls that have stayed open in the winter evenings and been warm. For people who do not have the money to keep their homes warm, they have been able to go to these community centers.
That's great to hear. Thank you. On to the questions from the web. First question from online, and I've had a number already on this topic. I'm going to go with JP Morgan. Question from Pavan Mahbubani . He says, "I was wondering what your thinking is on the inflationary environment, potentially giving governments a reason to pause on energy transition investment. We recently saw no new offshore wind capacity award in the U.K.'s most recent auction, so the AR5. Yesterday, we saw the U.K. PM roll back on other targets. Is this something that you see as a trend, as a significant risk, or is the case for your investments in the U.S. and U.K. grids well underpinned?
I think that's a great question, Pavan. I think what we've seen, actually, over the last 12-18 months, actually, is the different elements of the trilemma coming into balance. I think with the cost of living crisis, people have become acutely aware of affordability in the energy sector. At the same time, because of, obviously, things like the Ukraine-Russian war, security supply has lifted up as well. Of course, there's still the aspiration, as the Prime Minister in the U.K. reaffirmed yesterday, to achieve net zero by 2050. I think those three elements are all sort of all in balance, and we have to consider them all of the time. Looking at the sort of the different initiatives going on to achieve net zero, and what National Grid does is obviously build the infrastructure that enables that.
I think there is a recognition that, actually, by building that infrastructure, it is the route not only to net zero, but also to lower-priced energy. Therefore, although we are seeing inflationary pressures at the moment, I was quite pleased to see the Prime Minister talk about the need for planning reform and the need for connections reform to enable and speed up the infrastructure that needs to be built to ultimately connect offshore wind or nuclear onshore wind or solar. I am not too worried about what it means for National Grid because I think everybody recognizes that, actually, it is a true enabler.
A lot of the investments that we're doing, both in the U.K. and the U.S., are already underpinned by projects that are already either in operation, and we're doing it to relieve the constraints on the system, or actually in construction and are going to be needed over the next five to ten years.
Okay. Maybe on a similar theme to that, given the PM's changes to the U.K.'s net zero plans, and John, I know you already talked about the policy engagement that we do, but have we had any direct input to the changes, including infrastructure rollout?
Please know that yes is the obvious answer to that. National Grid, I think, has been at the forefront of really articulating what is needed to deliver infrastructure over the next decade or so. We set out in the spring that we needed to see clearer national planning statements that allow the process of getting approvals for construction to be done more simply. We fed into the Nick Windsor review that was looking at the whole of the planning process and looking for ways to streamline that. We are very supportive of Nick's recommendations. Referencing what was said yesterday by the Prime Minister, I know that a lot of the recommendations in the Nick Windsor review are going to be taken forward there. We have been very active in both sides of it.
I'm going to stick with U.K. infrastructure for a minute, but slightly different theme. We have had a question in, and maybe, Rhian, this is one for you. What impact will the ASTI projects have on the biodiversity in the U.K., and what are we doing to manage this?
Yeah. You'll have seen in the REFRESH charter that we've sort of refreshed our commitments on nature and biodiversity. What's interesting about this, particularly on nature, and we haven't done that many places elsewhere in our commitments, is we've actually taken a slightly different approach in the U.K. and the U.S. As I say, that's not something we've done. We've tried to keep many of our commitments global. In the case of the U.K., we want to improve the biodiversity, the nature, and the land that we manage. In the case of the U.S., we want to protect the land and the nature of the land we manage. The reason we've done it that way is because, actually, when you look at pictures of the natural environment in the U.K. and the U.S., it's really stark. There kind of isn't very much.
In the U.K., it's really about restoring it. In the U.S., there's plenty, so it's really about protecting it. Also, in our electricity distribution business and our electricity transmission business, we do have commitments, separate commitments on net gain on biodiversity. For that sense, the commitments we have will stand for the ASTI projects that we're delivering and the sorts of things that we do when we build. I've got an example of a substation that we have in the U.K. where we've planted trees, we've planted wildflower meadows. We've even done some coppice work and sort of managing of the forest around the substations. This has lots of benefits, actually, not just biodiversity, because we've had volunteers go in and do the work. It sort of also helps in terms of engaging in our communities.
There's a sort of well-being aspect to this as well.
Great. I'm going to go to the electricity system operator. The electricity system operator will leave us probably next year to become part of a future system operator in the U.K. What are the impacts to National Grid financially? The question is also around how will this impact generators, both new and existing, and how will this impact customer bills in the short and long- term? A few elements of that question.
Quite a lot in there. Let me just start by saying, where are we in terms of the separation of the ESO from National Grid? I think everybody's aware that we're very supportive of that. The ESO is going to take a much broader role, including sort of policy advice to government. It is right that it is separated from National Grid. The ESO is a tiny part of National Grid financially. I think last year it was less than 0.5% of our overall operating profit, so it has no significant financial impact. The separation is an important part of what is going on in the industry to enable the energy transition. In terms of the impact on generators, they should not see an impact compared to what they see today.
The electricity system operator is effectively responsible for identifying the investment that's needed when new generation comes along, working with the TOs, and also facilitates the connections process. There is lots of work going on to improve that. The separation of the ESO from National Grid should not impact that at all, nor should it impact on customer bills. The cost of the ESO is captured in the bills that are sent out to customers, as is the cost of National Grid and the distribution systems and the supply businesses. That separation should not have an impact on customer bills, either short term or long term.
Thank you. I'm going to stick with the U.K. for one more minute. If the government doesn't hit its target of 50 gigawatts of offshore wind, which is quite ambitious by 2030, how does that impact National Grid, and do we really need to do these accelerated transmission projects?
I think I'd separate it out. The ASTI projects are a very specific set of projects. Actually, there are 17 of them. As I said earlier, the vast majority of those projects are actually either to relieve constraints because of generation that's already being built or to avoid constraints because of generation that's under construction in the North Sea. I don't think there is any particular long-term impact on the ASTI projects as a result of whether we hit the 50 gigawatts or not. Obviously, ASTI is just the first step. The ESO is due to do what's called the HND follow-up exercise in the next few months. That may result in more infrastructure needing to be built in the 2030s, which will support the 50 gigawatts. Short term, no real impact on ASTI, I think.
We'll continue to look at it very carefully. Longer term, depending on what happens in the next set of auctions, will determine the pace and the speed of the CapEx that we'll need to do to support that.
Okay. Great. Thank you so far for all the questions that you've had coming in. Please do keep them coming. Do remember that if you want them asked anonymously, please just tick the box. We've got another one from SNBC, Chris Daley, who asks, "With most utilities in the U.K. and U.S. increasing their investment over the coming years, is there a danger that there'll be a skill shortage to deliver everything that's required in the energy transition? How do you overcome this potential risk and manage the risk of wage inflation that this could drive?
That's a great question, Chris. I mean, it sort of links back to what I said earlier, which is the thing that's really important for utilities is that we've got that visibility and that transparency of the work that we need to do. Because of the long-term nature of our business, as long as we can see that coming, then we can invest in the right skills that we need. National Grid, and I'm sure other utilities have done the same, have just undertaken a huge exercise, which we call strategic workforce planning, which is to look out not just over the next two to three years, but over the next decade in terms of what are the capabilities and skills that we need, not just to replace those that will be retiring, but the skills that we're going to need to actually build the infrastructure.
We are having similar conversations with our supply chain, who again are looking for that visibility so that they can build the capability as well. As you have heard during the discussion so far, in order to attract people, National Grid is very lucky because we are a responsible business. Because of the purpose that we have in enabling energy transition, we genuinely do attract people into the organization. We never had trouble in attracting people, but we need to be clear about how many we need. If we get that right, that will make sure that we avoid things like risk of wage inflation. At the same time, as a responsible employer, we want to offer people attractive packages, not only in terms of the wages they earn, but also in terms of opportunities and training and development.
When we talk to people that are joining National Grid, we talk about the overall package of opportunities that we can provide to them.
I'm going to move to the US, and we've had a few questions here on what is a relatively small part of our portfolio, but comes up quite often, Long Island Power Authority and our generation portfolio there. How do we plan to reduce the emissions from our generation?
Yeah. Again, a great question. I mean, just to lay out sort of how the generation works in Long Island, National Grid is the owner and the operator of that generation, but the contract that we have with the Long Island Power Authority is one in which they decide when the generation runs and actually what fuel is used to run it, either gas or oil. The contract that National Grid has with LIPA runs out to 2028. As I've said previously, we're in discussions with LIPA about that generation and what are the opportunities to replant it or use it in a different way to support offshore wind.
What is clear is some of that generation is going to be needed for many years to come, but it needs to align with the targets that have been set in New York, which is to get to full decarbonization of generation by 2040. That is an ongoing discussion that we have, and hopefully over the next period, we'll be able to talk about how we see the generation portfolio going forward.
Thank you. Maybe whilst we're talking about some of our emissions, we had a question just to clarify what our Scope 3 target is for 2030.
Yeah. We do have a Scope 3 target. It is for 2034, and it is to reduce our Scope 3 emissions by 37.5% based on a 2018-2019 baseline.
Correct.
Thank you. Sticking with the US, we've got a clean energy vision. We've had a question here on if we could just expand a bit more on our plans to decarbonize natural gas networks with hydrogen and RNG. What progress are we making? What are the hurdles? What do we need to address? Is it actually physically possible with the network we have?
Sure. Let me say why it's important. It's important because in the northeastern U.S., about one quarter of all greenhouse gas emissions come from the heating sector, heating homes and heating businesses. Decarbonizing heating is going to be critical for states to meet their goals. Having said that, there are a couple of pathways you can take. We believe a prudent pathway is ensuring that we utilize the natural gas network, but decarbonize the content of gas that's in that network. That's part of a bigger plan that we have. That plan calls for, number one, increasing the amount of energy efficiency in electricity and gas. We haven't reached our full potential of what we can do in the US around energy efficiency. Number two, we will look at some targeted electrification.
Installing heat pumps will be a critical part of that and a cornerstone of it. Let's face it, not every building can electrify and not every customer can afford to electrify. That's why we think a prudent pathway would be allowing customers to continue to use the natural gas network, but decarbonize the gas that's in that network by blending renewable natural gas and blending green hydrogen into that network as well. We are seeing some progress. We are integrating some RNG, a renewable natural gas developer's supply, into our network. We're seeing some progress on hydrogen as well. We've put forward a pilot program to blend in some green hydrogen to some consumers in Long Island. It's in front of our Public Service Commission right now, and we're getting some positive feedback on it.
Where we have to do some more work is moving the policies forward, the policies that create a carbon intensity standard. These things are further encouraged throughout the northeast.
Thank you. I'm going to come back to the U.K. We've had a question in from Pujarini Ghosh at Bernstein. Just circling back on the U.K. PM's comments yesterday and focusing on our National Grid electricity distribution business, will the PM's pushing back of the internal combustion engine ban in the U.K. from 2030 to 2035 have any material impact on rolling out our EV charging network, which is an important part of the infrastructure build-out and CapEx in our U.K. plans?
Yeah. I think in terms of the capital investment program we've got for electricity distribution, which we set out in our investor data, which is about GBP 7.5 billion over the five years, I think there are two elements that were sort of impacted by the Prime Minister's comments yesterday. One is that we've set out our expectation in terms of rolling out about or supporting 1.2 million EVs over that five-year period and similarly about 600,000 heat pumps. Actually, what we've seen is a significant uptick. I think we connected more customers to EVs last year than all the years previously that existed. We have seen a significant uptick. The level of investment in the next five years for both EVs and heat pumps is a very small proportion of that capital investment plan, probably less than 5%.
We're not expecting it to have a significant impact on the capital program that we've set out.
Thank you. Moving away from the environment more and to the social side and some of our commitments there, we've had an anonymous question in around you mentioned being diverse. How would National Grid define diverse?
It's a really good question. Thanks for asking it. In the RBC, the commitments we've got are to our management population and our new talent. We've focused in this particular version of the RBC on ethnicity and gender, as John set out at the beginning. To be really clear, that doesn't mean to say these are the only things that we look at inside National Grid. Actually, there's plenty of other characteristics of diversity that we focus on. It was just these are the ones that we wanted to focus on this time. It sort of moves us on from where we were last time, where we said we wanted diversity in our senior leadership population. We've sort of segmented a little bit more going forwards.
All right. Thank you. I'm going to stick with the topic of diversity for a moment. I've got another question here on what steps do you think are needed to achieve the gender and diversity targets at management and new joiner levels, particularly given that it's over quite a short- time frame?`
I'll start and perhaps then Rhian can add. In terms of new levers, what we're doing actually, and I sort of referenced it earlier on, is really looking at different areas, different communities, different backgrounds to really encourage people who traditionally have just not been attracted to the utility sector to come and have a look at companies like National Grid and really try and connect them to the energy transition that we're on. We think there is a great opportunity to do that. Our aim ultimately is to have a fully diverse new talent population coming into National Grid, and that will help with the overall diversity of the organization. It goes right back to the connecting to schools and to universities and colleges and in areas that traditionally that we've perhaps not focused. That for us is key.
On the management side, I have to say we've been very successful. I said earlier on that the senior leadership group of National Grid is now broadly 50% diverse. We continue to use, as I said, the fact that we're a responsible business, the purpose that we have as an organization to attract diverse talent into National Grid at the management level as well. We've been sort of relatively successful in that area.
I do not have a link to add, actually. I think you have covered it all.
Okay.
Good. I am going to ask a question on governance. Someone has asked, "I can see that the new Responsible Business Charter has removed governance as a pillar. How are you thinking about it? Are there dedicated board members or board committees explicitly responsible for things like ESG climate policy oversight?
Yeah. I should start by saying just because we do not have a governance pillar does not mean to say it is not important. It absolutely goes through everything that we do, and we report against it. There is a section in the responsible business report laying out what our governance is. Actually, it goes right to the top. We have a board subcommittee that talks about sustainability. We actually met earlier this week and were talking about nature and biodiversity. We meet as a group exec and talk about the management and the operational issues around sustainability. That cascades right through the business. Just because we do not have it as a pillar, it absolutely runs through the business.
Thank you. I'm going to circle back actually to U.S. gas. Is it possible to blend both hydrogen and RNG into the gas network together, or are they mutually exclusive? Is National Grid doing it anywhere across the business yet? Any examples of where we're doing that? Separately, also, why is the Scope 3 target 2034? This will be a follow-up question, I guess, and not 2030 like our Scope 1 and 2. Rhian, if you want to hit that one first and then.
Actually, it's really about the work that we did with the Science Based Targets Initiative. Our Scopes 1 and 2 are aligned to 1.5. Our Scope 3 is aligned actually to well below 2 degrees scenario, as was the discussions with SBTI. They said that the existing targets we had were fine, so we went with 2034 and 37.5%, although in the detail, we've tweaked it a little bit.
I'll cover the first part of the question. Is it mutually exclusive? It is not. You can blend both. What we have experience in is blending in renewable natural gas. We're doing that today across the network. Most recently, we went live with a renewable natural gas source in New York City. New York City has a wastewater treatment facility. We did the ribbon cutting, and it is up and running now. It is producing renewable natural gas that we're utilizing in our network. In terms of green hydrogen, we don't have that yet. That is a pilot that we're moving forward with. Just because we don't have it doesn't mean it doesn't happen somewhere. It happens elsewhere. We just don't blend green hydrogen into our network yet.
Thank you, Rudy. I have a few questions here on our gas networks in the U.S. One from Charles Schwab at HSBC, "Is the use of RNG in networks compatible to align with 1.5-degree SBTI?
I'll start. Yes, it is. It is one of the ways, one of the levers we can pull to bring down the carbon intensity of the fuel that's in that pipeline right now that gets used by our consumers. Yes, it is aligned.
Okay. That's great. Thank you. Please do keep your questions coming. I am going to move to a slightly different topic, cybersecurity, one that we do get asked about often. What are you doing to prepare National Grid for any potential threats?
Excellent question. I'm not going to talk specifically about what we're doing. That would be inappropriate, I think. What I will say is the way that National Grid thinks about cybersecurity is we think about how do we protect our real-time systems, how do we protect our business systems, and then how do we protect our operational technology. Today, an awful lot of the equipment that sits in substations and in remote areas could have chips in it, which could potentially be a threat to cyber. We protect all three of those layers and have several hundred people across National Grid spending hundreds of millions of GBP now in making sure that we have the protection that we need.
What I would also go to say is, given the role that National Grid has, we are very well connected, as you'd imagine, with the cybersecurity centers in both the U.K. and the equivalent in the U.S. In fact, we had a long discussion on cyber with the board this week here in New York to make sure that we are doing all the right things. Like any utility, we remain very alert to the threat and monitor our systems very, very carefully.
Thank you. I'm going to stick with a similar theme around digital. Someone's asked if there are any examples of how we're using things like advanced technologies, digitalization in our operations to reduce emissions and help us to meet our targets.
I mean, the simple answer is yes, and we're doing a huge amount across National Grid. I'll just give you a couple of examples. In terms of advancing technology, one of the targets you'll see in the RBC is that we're looking to reduce our SF6 emissions by 50% by 2030 and to get them off the network by 2050. For those who are not familiar with SF6, it is a gas that is used to allow us to switch electrical currents. It's used by all utilities all over the world, but it's actually a horrible gas. It's about 10,000 times more pollutant than CO2. We've been working at finding green alternatives to that with our supply chain. We've got an R&D project going on with the University of Manchester.
Our aim is first to reduce any leakage with regards to SF6, but ultimately find a new gas that can be used across the industry to take that off the system, and that will have a massive impact for us. In terms of other things that are going on, there is some fantastic technology now being put on the system. We have recently put some technology on our U.K. system that actually enables us to optimize the flows on the network to allow us, avoiding having to put new cables and overhead lines up, and therefore avoiding all the CO2 impact that that has. We are now actually starting to look at that in our U.S. business as well.
This is digital technology to operate networks, which is pretty exciting actually because it'll allow us to optimize the flows with all the different types of renewable generation that's going to be connected to the system.
Okay. Great. We are coming up pretty close to time. If you do have any last questions, please do put them through. One last one from me has come from Mark Freshney, "Thinking about the opportunities that are coming, how we fund them." This is Mark asking, not me. "It's clear National Grid could have more capital requirements than balance sheet capacity. What can be seen as a good position to be in? When can we expect to see another pivot in the portfolio or an announcement of other ways to fund this increase?
Thank you, Mark. I think my answer to this is going to be very similar to the answer I gave you last time you asked it, which was the results. First of all, we're very comfortable with the shape of the portfolio. As you know, we undertook a strategic pivot to get the shape of the group to be broadly 50% U.K., 50% U.S., 70% electric, 30% gas. We've achieved that. You would have seen the recent announcement where Macquarie have bought another 20% of our gas transmission business. In terms of the capital investment plan, as you know, we've set out a very clear trajectory between 2021 and 2026 with the objective of potentially spending up to GBP 40 billion during that period.
Beyond that, as I said at results, there are a few things that we just need to get clarity on before we can give more visibility to the market on what the CapEx plan looks like. One is exactly what is it that we're being asked to do. We've got a bit more clarity now through the ASTI projects in the U.K. We're starting to get more clarity in the U.S. as we go through the rate filing for Kedley and Kedney in the U.S. As well as what we're being asked to do, there's a big question about what's the profile of that CapEx. That gets you down to things like what is going to be the planning reform, is it going to be streamlined, and that will give us an indication of what the CapEx is going to be year- by- year.
As always, as you know, we have a toolkit available to National Grid in terms of how we fund that, as well as we've got good access to the debt markets. Obviously, we want to drive efficiency to create internal equity. We're a relatively low user of hybrid. We have historically, as you've seen, been able to redeploy capital. For example, the gas transmission sale has helped to fund some of the investment that we're doing. We have plenty of things in our toolkit, but the first step is really about understanding what the profile of CapEx is going to be. As soon as we've got that clarity, we'll, of course, share it with the market.
Thank you. I think that does take us nearly up to time. Thank you so much for your questions today. John, any final closing thoughts from you?
Only thing to say is, first of all, thank you for joining us. We really do appreciate it. Thank you for a fantastic set of questions. For me, this is the second responsible business charter that we've put out. The reason for that is, of course, the world is always changing, and we want to reflect what's going on in the world and continue to be a responsible business. We thank you for your engagement. If you have any comments or thoughts, we'd love to hear them because we don't see this as a one-off. We see this as an ongoing dialogue. Please let us know what your comments are on the responsible business charter and what more we should be doing. Thank you for joining us.