Good morning and good afternoon to everyone who's on the call. I'm Nick Ashworth, Director of Investor Relations here at National Grid, and I'll be moderating today's call. It gives me great pleasure to welcome you all to our third installment in our Grid Guide to Investor Series, this time focusing on decarbonisation of transport across our U.K. and U.S. Northeast regions. We'll shortly be playing a video, after which there'll be plenty of time for Q&A hosted by me with two of the presenters that you'll see in the video. To ask our speakers a question, please join via a Zoom link using the instructions under the Ask a Video Question tab, or alternatively, you can submit a question via the text box at the bottom of your screen, which I'll read on your behalf.
With that short intro, I hope you enjoy the video, and we look forward to taking your questions afterwards.
Hello and welcome to the third event in our Grid Guide 2 series. Thank you for joining us. Today, the focus is on decarbonisation of transport. Over the next 30 minutes, you'll hear from experts across our U.K. and U.S. businesses about the ways we're decarbonising our own vehicle fleets. Even more importantly, you'll hear about the work we're doing alongside our stakeholders on delivering the infrastructure required to enable a cleaner transport system across all our jurisdictions in the years to come. The focus isn't just on cars. We're looking at infrastructure solutions to enable a decarbonisation of all types of transport, no matter the scale or the complexity, from cars and vans to buses, HDVs, and rail, and even thinking further ahead to maritime and aviation.
Whilst we have different projects across our U.K. and U.S. Northeast businesses with different focuses between transmission and distribution, the overall challenge remains the same. Transportation now accounts for the largest source of greenhouse gas emissions, which continues to significantly impact air quality. In the U.K., you'll hear about the work in our electricity transmission business, continuing to support the government on Project Rapid, which will deliver an ultra-fast charging network, providing easily accessible charging points and reducing range anxiety. You'll also hear about how we're engaging in the government's broader transport decarbonisation plans. In the US, you'll hear about how we're working with all our stakeholders on programs that are delivering EV charging ports across our jurisdictions to residential and business customers, as well as encouraging the uptake of EVs through the rollout of charging infrastructure, fleet advisory services, and partnerships with our stakeholders.
Closer to home and as part of our Responsible Business Charter, we're also working to convert our own vehicle fleet to alternative clean fuels by 2030. You'll be able to keep up to date with our progress each year in our Responsible Business Report, with the first one published last month alongside our annual report. I hope you'll find today's session with our experts really useful and that you'll see the focus that we have to drive forward the decarbonisation of transport and the critical role that we're playing at the heart of the energy transition. We really look forward to you joining us for a question- and- answer session with our experts after the presentation.
The pathway to decarbonising transport is actually pretty complex. There is no one silver bullet to fix transport. As National Grid and my responsibility within National Grid is looking at transport as a whole, we can broadly divide that into four things: road, rail, aviation, and maritime. Let's focus on those in a few areas. The fastest- moving, the one that's moving and maturing most quickly, is road transport. We already have electric cars on the road. We have benefiting kinds of company cars that are going electric. We've already seen signalling from government to the end of the sale of petrol and diesel cars by 2030. That gives us a very definite time scale for action. We're currently here at the ITT Hub looking at commercial vehicles. Those will be the next vehicles to move into clean transport.
What we're broadly seeing is we're seeing public sector vehicles, so buses and coaches, likely to move fastest. For scale and volume, and benefit for National Grid, it's likely to be the haulage industry that's most important. I'll leave you with a thought. Next time you travel the motorways of the U.K., look out of the window, and you'll often see a lot of National Grid's infrastructure follow those strategic routes. Thinking further into rail, rail has been a customer of National Grid for quite some considerable time. It's just further evolution of a mature customer relationship. Looking a little further forward into maritime and aviation, these are two areas we've not touched before as a business.
In the sixth carbon budget from the Committee on Climate Change, which has recently been taken into law by government, they are actually counting international shipping and aviation emissions in our long-term carbon budgets. Now, the budget has not got bigger, but there are more calls on that budget now. The things that can go faster will go faster because we need to buy us time as a country. It will also mean we will need to engage and help shape the market because the technologies are not instantly clear for aviation and maritime. Different use cases, different technologies, but all of them will need National Grid to be the catalyst. If we look at the journey to net zero and the advice of the Committee on Climate Change, it says that we are going to need roughly twice the amount of electricity consumption that we have today.
That means we're going to have four times the amount of renewable energy to energy generation to deliver that. That means we're going to need roughly twice the grid. It shows you that National Grid and the distribution networks will be critical as the critical enabler on the journey to net zero. How does this show up? First, as the dirtiest thing we do is transport, moving people and goods. It's the area that's moving furthest and fastest. We already have electric cars as a product. They're starting to grow at scale. It was 2% of cars on the road had a plug last year. It's 7% of car sales on the roads this year. It's growing. We're on that exponential curve.
With the growth in renewables, so growth in more variable energy, we actually need the growth in smart consumption, the ability to use the renewables when they're most prevalent. That means that at both ends of our wire are critical: the upstream primary generation and the smart downstream consumption in transport. One of the most regularly asked questions of me, and it's one of those myths, is the grid can't cope with the transition to clean transport. The grid has never been static. Firstly, the grid has always evolved to suit the changing energy demands and power generation demands of the country. We've seen a huge shift over the last 10 to 15 years of the move away from coal and old gas towards renewables, new nuclear, onshore and offshore wind, and we're even seeing transmission- scale solar connecting to the transmission system.
The grid has never been static. It's always evolved. In the same way, the changing dynamic of the transport sector means the grid will need to evolve further. This is not a cliff edge. It's a managed transition. National Grid is front and center of that transition by working with government in the policy space, with Ofgem having the appropriate legislation and regulatory environment to stimulate that, but also engaging greatly with customers and stakeholders in transport for what is it they need the grid networks to do. That listening, that asking, and being responsive is incredibly important. What has National Grid been doing about the journey to decarbonizing transport? We've not just been trying to enable the country to go clean transport. We've actually been learning by doing ourselves. The executive in the U.K. have signed off on an alternatively fueled fleet by 2030.
We are not picking winners here. Right fuel for the right job. We now have a company car policy that says benefit cars can only be electric from April this year. We are also working on how we will take the next steps for the more difficult- to- fix fleet. We have off-road four-wheel drive vehicles. There is not a product today that we can buy. We are engaging with the manufacturers and the designers so that ultimately, by the time there is the right product, there is a willing customer to take that on. We are learning by doing as a business as much as trying to enable the rest of the country on the journey to net zero. What is National Grid doing to enable the transition to clean transport?
Firstly, we are the critical enabler of that transition because we do not make electricity by electricity or sell electricity. We do not make gas by gas or sell gas. We are the conduit from where it comes from to where it is consumed. We are critical in that process. What we realize is there needs to be legislative change, policy change, and regulatory change to facilitate that journey. What National Grid has been doing is using its size, scale, and power for good. We have been asking the transport sector what it is they need. They have been telling us what they need, and there are some strong themes that come out of that. We have taken what we have heard and played that to government and the regulator in the form of suggestions and ideas.
Government, in that way, has seen us as an enabler and a critical friend to help them shape and craft policy. National Grid responds greatly to policy because that's what drives the market and market certainty. We have been trying to use our power for good, be a critical friend to government and policymaker, and make sure that we are the enabler of that transition. Historically, National Grid has engaged with the energy sector. Now, that is normally the Department of Energy, Ofgem, our regulator. We found ourselves in a really new and interesting space. Some of our greatest engagement at the moment is with the Department of Transport. They are looking to get the whole country cleaner and greener through both electricity and hydrogen. That means we are that critical enabler. What we are bringing is the energy lens to a transport problem.
Energy is the fix to the transport challenge, and that needs greater collaboration. In essence, we're helping government and the regulator, and industry bring three challenging sectors together. We're bringing energy, transport, and digital. Successful deployment and the transition to net zero needs those three technologies. We're engaging with critical government departments. They're aligning around the solutions. It means that actually we've been playing a very different role. helping form policy, which we can then respond to as an industry. National Grid has been using its power for good. The best way to describe that is we've been helping government with their Project Rapid strategy. This is deploying strategic grid capacity along the motorway network in England. Now, actually, this came out of us as a business being asked, how do we fix the range anxiety problem?
Now, we're an energy utility, not a car maker, but we took on that challenge. We learned a lot and played that back to government. We then played it to the transport sector, who then agreed that actually having the right grid capacity at the right time to allow the transport sector to migrate to clean transport was key. That piece of work became policy suggestions that ultimately became government's road to zero strategy. That has now led to a GBP 950 million fund from government's treasury to actually deploy that. We are looking to see that end- to- end over the last two or three years to actually having grid connection applications to future-proof the road network. Looking further ahead, maritime and aviation are in the distance, but it is really important that National Grid engage with this.
In the sixth carbon budget, we're counting shipping and aviation as a country in those budgets. They're not immune to the need to change. Now, when we think about aviation, there's no magic bullet for getting planes in the air. There'll be a blend of all sorts: electricity, hydrogen, or synthetic fuels, e-fuels. When we think about aviation, my interesting stat for that is that 80% of our emissions come from just 20% of the flights. That's long haul. Long- haul can't be fixed by hydrogen or electricity. What is National Grid's role there? If you're making a synthetic or e-fuel, it's very energy- intensive. That is where National Grid will be playing a role in that. Will synthetic fuel be made at an airport or somewhere off-site? When we're looking at short haul, will they be electricity or hydrogen?
Probably a mixture of both. Are we going to need to make sure that all the airfields in the country have robust grid connections? These things take time. We will be working closely with the aviation sector and, more specifically, government's Jet Zero to make sure we are on hand to enable that transition. When we think about shipping, particularly. A t the moment, shipping is very heavy fuel. There is a lot of debate as to is there a stepping stone, which is liquefied natural gas, or is the answer ammonia? Either of those, there is a role for National Grid to play. Shore-based power initially and then refueling those vessels. We have not really had big grid connections at those coastal ports. That is going to be a function going forward. We are working closely with government on their maritime strategy. We get two things coming together.
If you look where some of those energy- intensive and critical ports are, they are likely to be very close to the offshore wind growth that we are seeing out to 2050. You see National Grid's role to play in trying to answer the transport problem, but also the primary green energy challenge. too. That is where our role is particularly critical. We are looking forward shortly to the slightly delayed government's decarbonisation of transport plan. This is really important. We are the first G7 economy to actually have a plan to decarbonise the way we move people and goods. That is going to cover everything. Firstly, travel less, but then active travel. It is going to talk about road, rail, aviation, and maritime. This is fundamental to that journey. You know that we are a critical enabler of that transition.
We've actually been helping government with how is that transition fuelled and where does the energy come from. We're really looking out for that.
Transportation emissions are the largest source of emissions in the U.S. Northeast, and they account for over 40% of greenhouse gas emissions. The electrification of transportation is such a huge part of our state's decarbonisation goals. These are goals that we support, and we're doing everything we can to accelerate the transition of that sector. Our work is wide-ranging. We have a comprehensive program to install EV charging infrastructure across all of our service territories. That covers commercial customers, fleet customers, residential customers. In fact, we have one of the largest regulator-approved utility EV infrastructure programs in the United States outside the state of California.
To date, we've installed around 3,000 charging ports out of so far approved 19,000 ports across our service territories.
In all three of our jurisdictions, the states have committed to ambitious light-duty EV targets by 2025, just in the next few years. Massachusetts is looking to have 300,000 EVs on the road by 2025. Rhode Island is looking to have 45,000, and New York is looking to have 850,000. All of our customers need support. This is not an easy transition. Our programs help to enable this transition for them by providing infrastructure that they need to transition their vehicles and convert their vehicles to electric options, or to learn what they need to do to prepare in the coming years, so that they can be part of this transition with us.
We're also working with our customers to develop programs and offerings that support them in being a part of grid resiliency and optimization, and enabling clean energy. Working with our customers to manage their charging and helping them to better understand the role that they play with the grid, which in many ways is very unique and new for a lot of customers, and very exciting for us to think about how we can engage them in thinking about how they play a role in grid optimization. We are now expanding our programs to serve our residential customers to help them enable charging at home and also manage that charging to optimize the grid. We are also adding to that and working with fleets.
We have developed fleet advisory service programs across all three of our jurisdictions to support those fleets that are looking for help in electrifying their vehicles so that they know what kind of vehicles and choices are out there for them and also helping them to assess their site needs and infrastructure needs so that they have the support all along the way to develop a roadmap and pathway forward.
We are committed to electrifying the majority of our own fleet by 2030. Finally, we recognize that transportation emissions disproportionately impact folks in low-income and disadvantaged communities. We need to do everything that we can to ensure that the benefits of clean transportation and clean air reach all customer segments and not just those individuals that are able to afford an electric vehicle.
For instance, we're partnering with major transit authorities and school districts to put electric buses on the road. For those folks that do have access to an electric vehicle, we need to make sure that the charging infrastructure is in publicly accessible locations, again, catering to the needs of individuals that live in apartment buildings or multi-unit housing developments.
A huge part of our strategy is to work with partners, stakeholders, our communities, the industry. As we develop our strategy, we're engaging those stakeholders into determining what the needs are and how we can work together to leverage existing efforts, future efforts, and also utilize the funds and resources that are already out there to make sure that we're moving forward together in a smart way. Partnerships are going to be a huge part of how we succeed in this work in the future.
We are really excited to continue building those partnerships and creating new relationships as we look to do this work.
There are really three ways that we can create an earnings pathway around electric vehicles and EV charging at National Grid. The first way is our very traditional utility earnings model, which is to build assets, rate-base them, and then earn our rate of return on them. That is likely to be a really important aspect of how we build our business around EVs. The second earnings opportunity we have around electric vehicle infrastructure is a performance incentive mechanism. This is essentially an earnings mechanism that allows the company to earn a return based on an agreed outcome. It is separate from the investment that the company is making. We do have several performance incentive mechanisms already established today in Massachusetts and New York.
Our Massachusetts performance incentive mechanism, for instance, is something we are going to maximize. It essentially incentivizes us to build a certain number of EV charging stations over the last three years. The goal for that was 680 charging stations. We are already above 680 charging stations. We are on pace to maximize that performance incentive mechanism. The last earnings pathway that I will mention, a way for us to build a business around electric vehicle charging, is the way that we treat infrastructure, what we call make-ready infrastructure, on the customer's property, on the customer side of the electric meter. This is something that is really important to this space.
A lot of the customers that we talk to who are interested in becoming site hosts cannot afford to build this infrastructure that will interconnect their EV charging station because it is expensive to build, and there are just not enough EVs that charge at that charging station to make it worth their while. What we can come in and do is either build that infrastructure ourselves or incentivize the customer to work with a contractor to build that infrastructure. We know there is a very significant amount of infrastructure investment that we will need to get built from now until 2025, from 2025 until 2030, and then even beyond that to enable the amount of EVs that need to be on the road in the states that we serve in the U.S. and to enable the EV charging infrastructure to fuel those vehicles.
To give you a sense of the scale, we have either gotten approved or proposed more than $400 million in investment over the next four years in the U.S. That is to enable a level of electric vehicle adoption that our states have for 2025 goals. Going out to 2030, those goals might double, might triple. We know they'll increase very significantly. The infrastructure investment required during that period will be very, very significant as well.
As we look to the future and as we've just filed in Massachusetts, we're looking to expand those programs exponentially. Our current proposal in Massachusetts will be over $250 million, and we'll be looking to expand our programs in all of our jurisdictions as we look to the future.
As we move forward, not only do we need to see investments happening within our own business, but we also need to see investments happening across all of our partnerships and stakeholders, whether it is state government passing policy to support these investments at the local and state level or policy at the federal level to ensure that tax credits and incentives and programs are being developed so that we can lead across the country and we can be a part of that. Additionally, there is a lot of education and awareness that is needed across our communities, both for residential customers and commercial customers.
Because this transition is so massive and the changes that are going to be occurring impact all of us, we need to work together to ensure that our communities and our customers have the support that they need to feel educated and empowered to be a part of this transition.
Electric vehicle charging and enabling the adoption of electric vehicles, and truly a clean transportation revolution, is a strategic imperative for National Grid. It is also a huge source of customer value and business growth. We know we have a good line of sight to the customer offerings and infrastructure we will need to build in the next three to five years. We know that there will be more infrastructure and more customer solutions that are needed out beyond that.
Many of the vehicle fleets we talk to these days are interested in electrification, but very few have a roadmap and a true game plan to how they're going to electrify. We know that'll change in the coming years, and National Grid's going to be ready to build the infrastructure to support them and offer products and services that can support those vehicle fleets as well. For us at National Grid, we know that EV charging and EV adoption is a huge source of value for us, not just for the next few years, but for many years to come. We need to do everything we can, again, to ensure that the charging infrastructure and the benefits of clean transportation and clean air reach all customer segments.
National Grid is committed to doing what we can to ensure that there is awareness, accessibility, and affordability in these programs, not only to accelerate these programs but also to ensure that the transition is just and equitable.
Hello and welcome to the live Q&A. I am delighted to be joined by Graeme Cooper, Head of Future Markets based in the U.K., and Jake Navarro, Director of Clean Transportation based in the U.S., who you have just seen in the video. As a reminder, to ask a question, please join via Zoom using the instructions under the Ask a Video Question tab and raise your hand. Alternatively, you can submit a question via the text box at the bottom of your screen, which I will read on your behalf.
The aim of the Grid Guide 2 series is to hear our experts talking about the critical work that they are doing to enable the wider energy transition. With that in mind, please, can I ask that you keep your questions focused on the decarbonisation of transport for our experts? As you know, WPD was recently acquired by National Grid. The transaction is still being reviewed by the U.K. Competition Regulator, and therefore, it is not possible for us to talk about, or take any questions on the transaction. With that said, we are going to go to our first question, and I think we have some coming through on Zoom. I am going to hand over to Dominic. Dominic, I can see you.
Oh, hello. Does this work? I am the first one on, so thank you for that. Can I have a couple of questions, please?
Firstly, there doesn't seem to be any mention of hydrogen in this presentation. I just wanted to curious as to what your views were on the role of the hydrogen versus power on the decarbonisation of transport. The second one could be a bit more sort of maybe a little bit more techie. What do you think is needed to upgrade the last mile network to get sort of faster charging? Do you think we're going to need a rollout of three-phase power to residentials, or do you think the existing network as is is going to be suitable for wholesale electrification of transport, please?
Thanks, Dominic. Let's start in the U.K., shall we? Graeme, are you happy to start there?
Yeah, no problem. Dominic, great to meet you and good questions. Thank you. When we look at hydrogen, let's pick that one first.
For cars and light vans, that is generally electricity is winning, right? If it was a competition, we cannot get to net zero without hydrogen. When we look at the hydrogen needed for transport, particularly road vehicles, let's focus on that now. T hey use fuel cells. Hydrogen fuel cell needs very, very clean hydrogen. Otherwise, you kill the membrane in the fuel cell. Therefore, for refueling purposes, you are likely to make the hydrogen through electrolysis. That is an electricity play. That is power to gas, obviously passing a current through water to create hydrogen. You are likely to end up making it where you need to refuel.
That means in all of the sort of the modeling work and the engineering work, it does not matter whether you are talking about a battery vehicle, or you are talking about a hydrogen vehicle, or you are talking about even overhead catenary, like the trains. What we can agree is that you need adequate future-proof grid capacity spaced along the strategic road network to allow any one of those three to come forward. What you are likely to see around hydrogen more in the transport space will be, to some extent, picking technology. When we think about HGVs, if it is a lighter truck, an Amazon parcel truck, that is high volume, low weight. That lends itself naturally more towards electricity than your battery-powered truck. If we are looking at a very heavy payload where volume is not the challenge, then it is more likely to be a hydrogen truck.
There is no single magic bullet to fixing this. The answer is both. That answers, I hope, the hydrogen challenge. Maybe a bit of geography around hydrogen as well, in that we have sort of hydrogen hotspots around the country, where industrial clusters, where the narrative is more around hydrogen. You could see a greater predisposition to having hydrogen in those locations. The other question I think you raised was around upgrading capacity. Now, there are two pieces very quickly. Upgrading three-phase to every home in the country, I think, feels a little bit like overkill. I do know that if you look at the ED2 business plans from the distribution companies are putting in, there is an element of upgrading last mile there. Do not forget, smart is going to get us quite a long way there.
We saw in the government's transport decarbonisation plan yesterday, I mentioned in the video, but it was actually published yesterday, one of the allied documents is for legislating for very smart charging. That will come forward later in the year and be applied from next year. Actually, just managing the charging may well help avoid some of those upgrade costs. It does not mean there will not be grid upgrades, but it will be optimised investment as opposed to building to peak plus headroom. It will be interesting to see how the regulator plays out on this, but it is one way we are engaging, certainly. Sorry, long answer to a short question, but I hope that answers both your questions for you.
Thanks, Graeme. Jake, U.S. perspective?
Yeah, thanks. You know, I think much of what Graeme said would apply to the U.S. as well.
Maybe two things I'll just add on the hydrogen front. I think, number one, I think Graeme said this in the video, but it's important to reiterate. You know, we're essentially technology agnostic, right? So whether you're fueling your vehicle with electrons or you're fueling it with hydrogen, National Grid's going to play a role in either of those things. Right now, the customers that we're talking to, electric vehicles are much more of interest to them. That feels like a much more obtainable technology right now. And so most of the direct-to-customer offerings and services that we have are focused on those purely electric battery vehicles. We have actually proposed in New York a hydrogen demonstration project that would offer it would be a fueling station that would offer both electrolysis and hydrogen fueling, as well as DC fast charging for pure battery vehicles.
That's something that's pending approval, but definitely something that we're looking at.
Perfect. Thank you very much, Jake. Dominic, your hand is raised. Is that good?
Yes, it is. Thank you very much.
Perfect. Thank you. I think then the next question, we'll keep on Zoom for now. Martin Young, investor, Martin.
Yep, good afternoon to everybody. I guess there's a couple of questions for Graeme. The first one follows on from Dominic's question about the last mile. Now, I believe, Graeme, that you recently had your own domestic connection upgraded, and clearly there are going to be people across the length and breadth of this country who want to do the same.
Just wondered how easy it was to get that upgrade facilitated, and do you see this as a potential bottleneck in the short term, or something that we should not really be concerned about as people move to increase the uptake of EVs and indeed heat pumps? The second question follows on from what you were saying about making sure that we had appropriate electrical connections at the various ports around this country, which obviously is a part of the decarbonisation plan that came out yesterday. I was cycling past Dungeness B the other week, and let's just say those wires are not that aesthetically pleasing.
As I rode past that, I wondered if they were going to be taken down at some stage. Should I really now be thinking about those wires being repurposed and redirected to some of the ports on the Southeast Coast as a long-term plan?
Yeah, let's pick those up in two cases. Yeah, I'm probably an extreme case at home. I live in a 100% electric home. I have an electric car, a plug-in hybrid, I have ground source heat pumps. I guess I'm the extreme case. We built an annex in the garden, which needed more power. I'm only rurally, I'm only one of three EV owners, and it's the three houses immediately here. Yeah, I triggered an upgrade, and actually, that was done in about eight weeks.
That's slightly more painful than I was expecting to be on cost, but we're still talking to SSE about that. It is doable. It was reasonably foreseeable. It did not limit my charging. It meant I was sharing one charger for two cars. I charge my electric car once a week, maybe twice a week. I charge the plug-in hybrid most days. It was not really a challenge in that sense. Let's pick up around things like Dungeness and visibility. There will be more wires required between now and net zero, as I said in the video. The Committee on Climate Change's balance pathway, which is their sort of central proposition, broadly says twice the amount of grid capacity we have now. That is not twice as many runs. That can be thicker cables on existing pylon runs. It can be buried cables.
It is not a case that you will see twice as much infrastructure. The challenge we have around visible infrastructure is economic and efficient is the principal driver for Ofgem as the regulator, which is a regulatory entity. We need to be able to demonstrate economic and efficient. Now, the cheapest way to move power by bulk is at 400,000 volts on overhead power lines. There is a level of visibility there that is a challenge. A view has the value, and that is valued differently by different people.
One of the things we're doing, particularly around the growth of infrastructure around the East Coast for the 40 GW of offshore wind, I know this is a transport discussion, but it applies, is that what we're actually doing is working with the likes of Greenpeace, the likes of Natural England, to actually talk to them around the trade-offs between overhead power lines and burying them. People assume just burying them is a great answer. The footprint of a pylon, a tower, is about 15 meters. If we're going to put that much energy in the ground, we need a land take of 127 meters wide. That is significant. Just burying wires isn't always the answer. We also then have to go through the justification process with Ofgem for them to allow any that appropriate spend.
If there is a visual immunity issue, we do need the community, the stakeholders, to signal sufficiently, which will allow us to go through the Ofgem process to demonstrate why cheapest, as far as infrastructure, is not always necessarily consentable or deliverable. Ofgem is in the process of thinking about how they change to regulate for net zero, as opposed to where they sort of are near and now, which is more sort of regulating in spite of net zero. It's the way they've regulated today. Jonathan Brearley, the boss of Ofgem, has absolutely signaled that they're looking to evolve the considerations that Ofgem count in those. As far as where those wires are today, there is a requirement first to take them down when they're not used. I half suspect that there is somebody looking to replace that power station with something else.
I hope that answers your questions.
Can I just ask a very short follow-up on getting the additional connections? Do you see this as a short-term impediment to the take-up of electric vehicles and heat pumps? Are you confident that, shall we say, the DNOs have the necessary capabilities and capacity at this moment to do what's needed when it's needed?
What we're seeing right now, talking about the DNOs in general, is obviously they have just started to submit to Ofgem, and a lot of them publicly, on their RIIO-ED2 plans. They are quite aggressive and punchy with the uptake in EVs and their ask of ED2 to provide adequate funding for that. We are very engaged with the DNOs because, of course, they are essentially a National Grid customer.
As it comes down from 400,000 volts to 275 and then down to 132, which is where it changes from transmission to distribution, those boundary points become quite critical. We are looking to work with them so that instead of waiting for those boundary points to get full, and then it takes us a few years to upgrade the boundary point, to signal early as they're seeing the uptake in demand from heat pumps and from electric vehicles so that we're signaled well in time to work on the upgrade of those boundary points. To answer your question, will it be okay? I'm pretty confident it'll be okay. Don't forget, as I said in the beginning, this is a managed transition. This is not a cliff edge.
It is dependent on the drivers of the heat strategy, the drivers of the EV strategy, and also the ultimate settlement that the distribution companies get, which starts in 2023.
Thanks, Graeme. Can I just open that out actually, to the U.S. as well? Thinking about any bottlenecks, thinking about the number of EVs are growing all the time. Jake, given that we own distribution in the U.S., have we seen any issues as we've seen the number of EVs increase on the roads in the U.S.? Can you talk a little bit about what we're seeing in real time?
Absolutely. I think one thing that's important to note is the U.S. as a whole is a little bit behind the U.K. in terms of EV adoption. We're still more towards that low single-digit market share, whereas the U.K. is starting to go off that hockey stick curve.
Today, we do not see major issues with our distribution grid or our transmission grid in the U.S. from EV charging load. As Graeme said, similar in the U.S., we are confident that we will be able to support the EV charging load as it starts to increase, and we do start to see that hockey stick kind of adoption. We know a lot of system investment is needed, and that is both on our distribution system in the U.S. and the transmission system. One thing that I will maybe add to the conversation here is where we see some of the biggest potential bottlenecks and where we have to start moving very aggressively and are moving very aggressively already is with electric vehicle fleets, right? I think when you think of residential EV adoption, you are thinking of light-duty passenger vehicles. It is very spread out.
You may see isolated issues where one neighborhood all of a sudden dramatically increases the number of EVs in that neighborhood, and we may need to do some distribution upgrades or service transformer upgrades in those neighborhoods. Where we see a much bigger challenge and a much bigger opportunity is with vehicle fleets, because you think about a transit bus depot, for instance. That is where you could see very highly concentrated, very high demand, very quickly if that fleet decides to electrify. We are already working very closely with many of the companies in our service territory that operate vehicle fleets to talk about, okay, is this on your radar? What is your roadmap?
If you think you're maybe going to electrify a couple of buses in the next couple of years, but you're going to electrify hundreds by 2030, let's start building the solution for 2030 now, because it'll take us that much time in some cases to build out the infrastructure that's needed. I totally agree with what Graeme said about a managed transition. It's important for us to work really closely with our customers and make sure that we're prospectively building for that future state of high EV adoption.
Points for me to jump in as far as this thing isn't, this transition isn't seamless, right? We've already seen market failure by which governments have acknowledged and intervened. I'll use the example of the motorway service areas. Motorway service areas in England are halfway between somewhere and somewhere else.
They're often on the end of a very, very bit of weak grid network. What we've seen is the growth in EV charging and motorway service areas has struggled because hybrid connection costs, poor certainty of utilization. Actually, in asking the market what the barriers were, this was a really strong message that came out from industry, which we played back to government. We then worked with government to look at how you would overcome that range anxiety. They've agreed and come out with a policy called Project Rapid and a GBP 950 million Project Rapid fund. That is to deploy future-proof grid connection capacity for cars and light vans at every motorway service area and strategic road network rest stop to provide a minimum of six ultra-rapid chargers by 2023, 2,000 plus by 2030, and 6,000 by 2035.
Now, typically, a motorway service area, just so you want to get into the numbers, is about a 1 megawatt grid capacity. Now, that'll serve you burgers and pizzas and fruit machines, which is what you have today. Just six ultra-rapid EV chargers need a 1 M-W, 1.25 M-W grid connection. If you're going to future-proof for what cars need, you're going to need somewhere like an 8-10 M-W grid connection by the 2030s. If you then add buses, trucks, and coaches, and we saw the signaling yesterday on the ending of the sale of diesel trucks by 2035 and 2040, depending on size, you could need somewhere between 18 and 20 M-W grid connections. What we're looking to see in the autumn is actually a delivery body to look at delivering the future-proof grid capacity along the English parts of the strategic road network to have adequate future-proof grid capacity.
It is not doing the charging itself. That market is really, really liquid, but trying to commit to a big grid connection for a great period of time is very difficult for what is actually still a relatively nascent market. This is not seamless, but where there is a failure, observations have been made, and targeted intervention is being programmed and planned. We are likely to see the first grid connections on a mixture of big distribution and transmission connections that are likely to happen probably this autumn. That is a three or four-year delivery period to deliver all those future grid capacity. I hope that helps.
Thanks, Graeme. I think we are going to stick with Zoom and go to Verity Mitchell at HSBC. Verity.
I did not have a question, actually. But now you have given me the floor.
I think I would just the issue that I was a similar one for Martin is the prohibitive cost that I'm seeing for some of my neighbors trying to install charging points in their houses. It is costly. You mentioned six weeks. I do think that is going to slow the process down. That would just be my observation from talking to people, very much backing up what's already been said.
I mean, just with a couple of things. Government yesterday committed to the plug-in car grant. The GBP 350 towards car chargers, if that's the piece you're referring to. In the anticipation of a car charger, you can actually charge a car on a 13-amp three-pin socket. It just takes a chunk longer in time, and you have to be very careful with that.
As far as upgrades, one of the things that is going through Ofgem legislation right now is actually they're looking at changing the distribution charging methodology so that demand connections will avoid a chunk of those upgrade costs. There is a minded-to position from Ofgem. Obviously, a minded-to position has to then go through the legislative process. One of those things that I think we will see in the not-too-distant future is much, much lower cost for distribution demand connections. I appreciate I'm coming from a transmission perspective, but that's certainly what I observe as a change in the market. Things are likely to improve as we move forward.
Sorry, yeah, go ahead.
Go ahead, Jake.
Yeah, sorry. Just to add the U.S. perspective on this, where we do have a distribution presence. We hear that from customers all the time, right?
Either it's challenging to make your house ready for EV charging, or it's cost-prohibitive. One of the things that we've proposed in Massachusetts and in New York, we don't have approval to do either of these programs yet, but we're confident that we'll be able to work with our regulators and create a residential charging make-ready offering. It's essentially a turnkey solution. National Grid will work with an electrician to have a sort of seamless white-glove service to upgrade your house, make your garage or your driveway ready for a level two EV charger. We will also subsidize some of that cost, right? The goal is to get more EVs on the road and more EVs charging on our electric system.
We know that in many places, especially in the northeastern U.S., where our service territory is, the housing stock is very old, and wiring upgrades can be quite expensive or quite painful for customers. We also know that for environmental justice communities, our lower-income or our underserved communities, this process is even more painful. We actually offer higher incentives for customers in environmental justice communities to upgrade their homes to make them ready for electric vehicle charging.
Thanks, Jake. I think we are sticking with Zoom and to Joseph Fillon. Joseph.
Hi there from the other side of the pond in the U.S. This question is for Jake. Jake, you mentioned that the U.S. is a bit behind the U.K. in terms of EV adoption.
Just wondering what lessons National Grid has learned in the U.K. around transport electrification and EV charging that you're now applying to the U.S. business, and equally areas where maybe your business in the northeast of the U.S. is unique and different from the U.K.
Absolutely. Thanks for the question. Good to hear a fellow American accent. Yes, we absolutely have spoken with our U.K. colleagues. Graeme and I are sort of on speed dial for one another at this point. I will say the businesses are quite different, right? With our distribution in the U.S., our retail business that's direct to customers, the solutions that are needed and the solutions we're able to offer those customers are pretty different than what we can offer in the U.K. One of the things that we've taken from the U.K. is where we advocate for policy.
I think the policies that Graeme has spoken about and the leadership that the U.K. government has shown with some help from National Grid on the transition to decarbonisation of transport are things that we can learn from here in the U.S. We have advocated for policies like that, state or federal policies that increase subsidies for EV adoption, just pure tax incentives for EVs, incentives for EV charging, things like school bus incentives that can make electrification of school buses more realistic for particularly low-income communities, but really any community. I'll also say we have been able to learn quite a bit from other distribution companies, electric distribution utilities in other parts of the U.S.
California has shown real leadership as a state, and the utilities in that state are folks that we've talked to and learned lessons about what went well for them early in their transition, maybe what did not go so well. We have built our programs with that influence. There are plenty of lessons to be learned. I think we are also very optimistic that, at least in the U.S. Northeast, we are on the road to catching up to other parts of the world in terms of EV adoption pretty soon.
Thanks, Jake. Graeme, just on the back of that, because we talk about the U.K. being a bit ahead of the U.S., the U.K. is certainly not necessarily the world's leader here. Where are we getting learnings from in the U.K. as well?
Yeah, certainly. It is a really good question.
If you look across Europe, actually, the most advanced is Norway, okay? Very energy-literate country, 98% run on hydro, but huge oil and gas reserves. They've gone much, much earlier on their vans. I think they're somewhere deep into about 60% of all car sales are electrical-ready. That's moving very, very quickly. We've looked to some of the things that are working there and some of the things that do not apply there. I mean, obviously, it's a very socialist country, so everyone is equal. There's universal decisions on these things. We look to Norway, for example. We look to, and we've looked to California and seen some of the early learning there.
The one thing we do, and it is the point that Jake made really, really well, the best thing we do is when we realize that we are the catalyst for the change, right? Truck and car manufacturers want to sell a product. It's on four rubber tires. They've never had to think about what goes in it before. Actually, by National Grid asking, not telling, we've been able to get great insights in the U.K. because we're a price-regulated monopoly. We're not competing with anybody specifically. They've been very generous with their hopes, fears, and business models. That has allowed us really efficiently to see some of these failures. That's what we've been playing into government, as a best way to describe it, as government's critical friend. That's why we've been helping shape and form policy.
The one thing a big price-regulated monopoly responds well to is policy. We have been helping craft the policy that we will respond to. If you look in the U.K. to the group of documents that came out yesterday, the Transport Decarbonisation Plan and the associated document, I probably strongly argue that we had a hand in a little over 60% of those with the departments forming those. There were no sharp intake of breath moments with any of those documents, no surprises, which is always a good thing to do when you are seeing policy being delivered. Yes, asking, not telling, engaging with policy, and ensuring that we are that enabler. Because if we are not an enabler, you could argue that we are a barrier.
Brilliant. Thank you very much, Graeme.
Chris Abbott, I can see that you're on my Zoom screen, but can I just ask a couple of questions online first? We've got loads of them coming in. I feel like we're monopolizing through Zoom. The first one is from Sam Erik, UBS. It's a bit of a long one, very unlike Sam. Hi there. The content of this presentation is fascinating. Thank you. Thank you, Sam. The challenge is always to quantify these things. Can the team provide any simple rules of thumb or ratios that help us think about how decarbonization of transport will feed through to rate-based impacts for the grid? Is there anything that we can say in terms of scaling up over the next 5, 10 years, anything around costs, or anything around percentage increase in rate base? Graeme, starting in the U.K.
I'll happily dive in from a U.K. perspective. We are obviously, as you appreciate from those with a U.K. lens, we're in the RIIO-T2 period. When we were forming RIIO-T2, there was too much uncertainty around what the uptick in transport decarbonisation was going to look like. We didn't put a lot of detail in. What we're seeing in discussions with Ofgem now is we're busy exploring with them net zero reopeners and uncertainty mechanisms around some of the changes that we're starting to see in the policies this week. I would also strongly argue that what we're likely to see at the moment is we're still in the very, very early adopter stage. We are just really seeing this down mainly in the distribution level. In the next price control period, this will just be low-level noise.
If I'm being honest, I can't give you a number. What we're trying to make sure we set ourselves up for is this will really start to scale in the next price control period. Making sure that the RIIO-T3, or whatever it ends up being ultimately called, we're in a good and a robust place to make sure that we capitalize on delivery and outperformance. Unfortunately, I can't give you a number because, as I say, we're seeing the policy development right now. The best indicator I can probably give you, though, is if you look at the legally separate electricity system operator, the ESO, they published on Monday the future energy scenarios. Only one of their main scenarios, the greenest one, is the one that delivers to both the COP targets and our legally binding climate objectives.
That gives you a pretty good feel for the uptake. Just how that relates to actual infrastructure investment is not entirely clear. I can't really give you some hard numbers, but we are absolutely watching this like a hawk. I guess it's one that will evolve over further discussions and presentations like this as we nail that down. We do have a team working in engineering. They've taken the route map, the balanced pathway that the CCC put out, and they're building a grid model that says, what will the National Grid need to look like by 2050, based on the scenarios? We will actually know how much wire, how many transformers, how many substations. That is live and working now. We're doing some sensitivity analysis, and that's likely to probably roll into early next year before we have some real clarity.
It is just a challenge of responding to the uptick in the change in those markets. A great deal of uncertainty as to when we will be getting greater clarity on the what and the how in the coming months.
Thanks, Graeme. Jake, anything to add in the U.S.?
Absolutely. It is funny. Yesterday, the 14th was a big day in EV world on both sides of the pond, it seems like, with the U.K.'s decarbonisation of transport plan. In the U.S., we filed our largest proposal ever around clean transportation. It was in our Massachusetts jurisdiction. This is a $278 million total investment that we have proposed over the next four years.
Just to give you a sense of scale between programs we have proposed or actually already have approval for, between now and 2025, our total investment will be significantly more than $400 million, and much of that being capital investments or regulatory assets that we earn our regulated rate of return on. Remember, out to 2025, that is essentially investment to kind of solve the chicken or egg problem that we see here in the U.S., of very few EVs being adopted, partially because there is not enough charging available, and very few chargers being built because there are not enough EVs out there to charge at them. Much of our investment will help solve that chicken- or- egg problem by getting the chargers out there, making the business model pencil out for EV charging site hosts.
That will, in turn, spur EV adoption, and there will be a virtuous cycle created. Beyond 2025, when we start to see real levels, really impactful levels of EV adoption, and start to get more into the medium and heavy-duty EV space, that is where you will start to see even more significant investments and, in many cases, more traditional capital investments.
Brilliant. Thanks, Jake. Another one from online. We have a sign from Norges. Just going back to hydrogen at the beginning. Hydrogen for heavy- duty. How can hydrogen production from renewable power and water electrolysis avoid onerous grid charges if possible? Can you explain, please?
Okay. Yes, I will try and explain.
When we modeled the motorway network, we looked at the grid capacity needed if you had a battery truck, whether it was a hydrogen refueler, or whether it was for overhead catenary, if that is the solution we ultimately end up with. When we modeled for that, there are a couple of things that play out. You realize the value of flexibility. Time of use is important. If you are going to use—I mean, actually, let's pause for a second. We are seeing getting to 40 GW of offshore wind by 2030 is part of the other job that I have within National Grid, going from 10 GW now, which has taken us 20 years to get to, to 40 GW by 2030.
What we will see is a great deal of price volatility, an increased price volatility in the energy market on high wind, low demand days, and on high solar, low demand days. One of the things that we're seeing in and around hydrogen is the argument is it's less efficient around chip efficiency, using electricity to make hydrogen, to put it in a vehicle, to turn it back to electricity for forward motion. That relative efficiency falls away when the commodity is spare. We're also starting to see those doing electrolysis thinking around avoided cost. If the control room is balancing the grid, it can either pay power to turn down, or it can pay something to consume more power. That relative efficiency could fall away when we have more price volatility in the energy market.
As far as grid charges, at least at the moment on the motorway network, we are expecting government's GBP 950 million to be a government-owned fund. They will own the grid connection initially. Therefore, those plugging into it are likely to be somewhat divorced from the grid connection costs. That will help the inter-site, your en route refueling, for want of a better term. We do know that at least at distribution level, demand charges are being reviewed. There is a minded-to position by Ofgem. You could argue that in time, there may be a consideration that actually Ofgem starts to consider the reflectivity up to transmission level. At the moment, there is not a really clear path around avoided grid cost, but there are a number of value streams that sit around hydrogen, around the flexibility piece and avoided costs in there.
The thing that worries me just a minute, when I see those modeling hydrogen, they are only thinking about a constant price of their energy in to make hydrogen to get to a target price. This gets clever when they generate more hydrogen and store it because the cheapest thing actually is the pressure vessel for storage. If you make plenty when the grid is cleanest, cheapest, then that actually will save you money, and you avoid making through electrolysis hydrogen when the grid is dirtiest and more expensive. There is a price arbitrage sort of play in there. As I say, there is also another revenue stream in the avoided cost of curtailing wind or curtailing solar when actually you could be paid to take that power and use more because it may be cheaper. There are some interesting plays in the dynamics of that market.
That is why National Grid is technology agnostic, is not picking winners. For us, it is about facilitating the journey to transport decarbonisation in whatever form that takes.
Brilliant. Thank you very much, Graeme. I think we are going to go back to Zoom now. Chris Abbott, Morgan Stanley, thank you very much for your patience.
No problem. Thank you. Good afternoon, everyone. My question was really very similar to Sam's. I will not ask it again, but just in terms of the path from now to 2050, do you think we are on the right track at this stage, or do we need to accelerate to within the sort of realms of the acceleration that you are currently anticipating in the next 5-10 years, or do we really need to start to accelerate a lot more to get there?
What's the—and I guess you have sort of answered with the modeling that you're doing and the sort of the 2050 work, but your sense for how comfortable you're feeling would be terrific.
Thank you. Yeah, certainly. I'll dive in if you don't mind, Nick. That's a really, really good question. I guess I'm going to give you a bit of a Graeme Cooper view rather than a sort of formal National Grid view because obviously National Grid responds to the market signals. If it goes faster, we'll respond faster. I guess that's the kind of National Grid view of the world. When I look from a Graeme Cooper perspective, I think this will be much more like most technology disruptors. If you look at the uptick in home video recorders, that was a hockey stick. The uptick in game systems, hockey stick.
Smartphones, it was a hockey stick. What we're starting to see already is a solid hockey stick forming through electric cars. There's no reason why we won't see a solid hockey stick through vans and into trucking. You could argue today that we need to be moving further, faster, but there is an element of having greater certainty around the outcome. By having these clear policy objectives being set yesterday, I think what we will start to see is better industry-making, lower-risk decisions. Therefore, we will start to see what that hockey stick could look like. The interesting thing from our perspective is obviously it takes time to deploy infrastructure. We need to watch very carefully that we're timing what we're seeing, playing that to the regulator at an appropriate time scale so that we have time to deploy.
That's really what I'm watching for, but we're still early in that process. The one thing that was interesting by being an energy utility and talking to the transport industry, I had a long discussion with a number of people in fleet logistics. They're working on 1% or 2% margins in fleet logistics. Really, really high volume, low margin gain. They can't afford to have an error in picking the thing that fuels the vehicle. There's not enough margin for them to make an error. What they are seeing off the back of the announcements this week is greater certainty and therefore lower risk to pick the technology that will win. I think that increased confidence will certainly help make the market move at pace. Time is our biggest enemy. Net zero is not getting any further away.
Climate change is impacting us on a daily basis. Just look at the news today from Germany. Can we move faster? Yes. Should we move faster? Yes. Are we moving fast enough? I think at the moment we need to look to see how the hockey stick's coming forward. I think we'll really start to see that in the coming year, 18 months, two years.
Jake,
to sort of add on to what Graeme said, I think that if I could hopefully not be too cheeky about the response, the idea of are we on the right path today and do we need to accelerate dramatically, I think the answer to both of those is yes.
I think the pathway that actually that we've laid out has a path of very dramatic acceleration, both in terms of what National Grid needs to do and the broader industry and policy activities that need to happen. I'll just give you an example. Much shorter term than the timeline you asked about in the question, but in the state of Massachusetts, where I am right now, the state has established a goal for 2030 of 300,000 EVs on the road. Right now, where we sit today, we have about 38,000. At the same time, in the U.S., we've hit an all-time high for vehicle age. People are hanging on to their cars much longer.
The turnaround cycle, the replacement cycle that we have to replace those EVs to 2025, which again is just a starting point, and then to 2030 and to 2035, where these goals get much, much more ambitious and much, much more aggressive, there's not a lot of time. I am very encouraged by the plans and the leadership position that we're taking as a company, and also what we're seeing in terms of the public policy debate and what the rest of the industry is doing, right? I think in the U.S., there's going to be between 20 and 30 new electric vehicles, new electric vehicle models that launch in the U.S. this year. All of that is going to really help with that dramatic acceleration. I won't say I'm feeling comfortable, but I'm comfortably uncomfortable, if that makes sense.
Uncomfortably uncomfortable.
That's a great one. Sorry.
Jake, just a quick follow-on, actually, because it goes to a question that we've had on the webcast around COVID. We've seen and we've talked about as a group the impacts of COVID in the U.S. Northeast over the last 12-18 months. Has that had any impact on the uptake of EVs? Has that slowed anything down in the near term?
A good news story that came out of COVID was that while we saw vehicle sales overall decline significantly during the pandemic, electric vehicle sales actually improved during the pandemic in the U.S. That was a positive outcome, right? EV sales were not as affected by the pandemic. That's probably a sign that we're beginning to get on that hockey stick-like curve that Graeme talked about.
The other thing I'll mention is that while for our programs where we are helping enable EV charging ports and more EV charging stations, while we did see some impacts from the pandemic, there were actually some positives as well. Some businesses or schools, or other organizations that did not have employees or students or customers at their facilities took the opportunity to do construction work during that time, right? It is much easier to dig up a parking lot if there is nobody parking in it. We actually saw some uptick in our EV charging programs and the infrastructure that we are building there. Other organizations obviously were quite affected. Their financials and their businesses were quite affected by the pandemic. We saw a slowdown that ended up balancing out a bit. There were good news stories to come out of the pandemic on the EV side.
Thanks, Jake. Graeme, did you want to jump in?
Yeah, there's a useful few things come out from a U.K. perspective. We're obviously, principally, when we're talking about decarbonising transport, we're talking about decarbonising, and it's the climate change and those targets. Actually, in the U.K., nearly 40,000 people die prematurely every year from the impacts of poor air quality. Most towns and cities breach minimum European air quality directives, which were mandated into U.K. law, twice a day at rush hour. It's transport that's driving those. Having had the first lockdown, the one thing most people agreed was that weren't towns and cities clean and quiet. There's a huge driver now around the air quality agenda, and we're seeing it through emission zones. That's driving uptake.
What we've also seen is governments have done a couple of clever things in the U.K. to try and drive uptake too. What they've done is they've done a very low BIK rate, benefit in kind rate for company car drivers. 54% of all new car sales are company-derived cars. If you're a company car driver with a very, very low BIK rate, the tax you pay for the car you benefit from, it's a bit like getting a very cool electric car and getting a pay rise. What's happening more interestingly is that people will often argue that electric cars are expensive. What will happen is the cars that are being delivered for companies today will become the second-hand car market in three years' time. Obviously, on the depreciation curve, those cars are going to be roughly half price.
What it does do is it pump primes the new car sales to go electric. As we pointed out, National Grid in the U.K., you can only have a company car if it's electric. That will also then pump prime the second-hand market with half-price electric cars three years hence. That's incredibly clever because it's answering the affordability and playing to the right levers. Even more interesting, and this is where you start to see bits of joined-up government, Treasury really like that as a lever because it's actually cost-neutral. The VAT on the more expensive car upfront gives them a take to offset the loss from benefit in kind treatment through the three years that you have the car.
Actually, it's one of those policy levers that looks like it's expensive, but it's actually net neutral and has the wider benefit of priming that second-hand market. The biggest limiting factor, if I'm being honest, is going to be the supply of electric vehicles. That's why we're starting to see in the U.K. press the announcement last week around growth in Nissan and their factory in Sunderland. We've seen the planning permission granted for the Britishvolt factory. We will see probably, I suspect, more announcements around vehicles and battery factories in and around the U.K.
Great. Thank you, Graeme. Going back to the webcast, we've had four or five questions from Steve Broderick.
Steve, apologies, I haven't got this quite right, but if I look at them, the main takeaway seems to be the assertion that there's a question mark around whether smart is strong enough to support EV demand, or do we need a full reinforcement of lines? I'm going to ask one of the questions that you sent through, which is, my simulation work and recent real-world measurements show that in the U.K., at least, EV load is up 60% in winter versus summer. Is this load jump in winter factored in? Does this mean far greater charge point use in winter versus summer? What do those bare charge points do in summer when not being used? It was a U.K. question. I'll start with you, therefore, Graeme, and then Jake, come to you to hear what's going on in the U.S. as well.
It picks up on a number of things. Let's pick up on the smart bit first. Traditionally, those in smart technologies and distributed generation argue that we do not need any more wires. Smart will fix everything. The answer simply is that that does not work. It means what you have got works more efficiently, but it does not get you out of jail. Just look back to the Commission on Climate Changes. Twice the amount of electricity consumption, four times the amount of renewables, twice the grid. What it does do is often, yeah, the utilities say, yeah, just build wires. Do not do smart. The answer is both. What we have done in the U.K. over time is we have typically built grid networks to system peak, that half an hour winter, a foot of snow on the ground, high demand, low wind, and then built headroom, 10% or 15% headroom.
What I think we will see as we go forward with this growth in generation, growth in demand, growth in network, is that smart will mean that we will build networks to optimized as opposed to peak plus headroom. There is an element of chicken and egg. We have one of the most reliable grid networks in the world. National Grid in the U.K. is 99.999987% reliable, which is less than seven seconds a year. We regularly outperform that. The answer to the smart is smart will not get us there alone. Investment on its own in infrastructure is not the right answer. They will have to go hand in hand. This is why I made the point in the video. We are bringing three technologies together or sectors together, energy, transport, and digital.
Digital is kind of the glue that is actually going to allow that transition to be more effective. When we look at smart charging at home, I am already smart charging the car through a Clever app. What it does is it allows my car only to charge when it is less than 0.09 units, and it only allows my car to charge when it is less than 90 grams of CO2 per K-W hour. It does that by taking a hidden feed, an API, from my energy supplier. It also then takes from National Grid's control room a carbon intensity API, a signal on carbon. It runs an algorithm. It makes sure that my car is charged only when the grid is cleanest and cheapest.
We will see more of that, and some of that is going to be mandated in the bill that's coming through and was signaled yesterday. Summer to winter, this is a really interesting one. When batteries are cold, it's difficult to get the power out. So you have a shortening of range, but in the same way, cars are less efficient when they're cold and working hard in the winter, too. Yes, there will be a bit of a slew. What we are generally, in our experience to date, most people forget that they think they travel far further than they actually do in the U.K., and this will be very different to the U.S.
Our typical first car in a family does 37 mi a day, which means most cars will only need to be charged maybe once or twice a week or topped up for maybe just 35-45 minutes every night, depending on how you want to do that, to make up for that 37 mi a day. If you're lucky enough to have a second car, actually, it does even less. It does 11 mi on average a day. We use distances much shorter than we really realize. Have we modeled for winter to summer? I guess yes and no. There is a detail around this in the National Grid ESO Future Energy Scenarios. What we are doing, though, is most of the models that you see, so the Bloomberg and the Commission on Climate Change are energy models. They look at the volume of energy.
What they do not do is they do not look at power, which is obviously the peak demand, which sets the size of the wires. Part of the work we are doing at the moment on modeling the network out to 2050 is actually taking those energy models and converting them into a power model. Now, what we are finding in certain cases is the difference between the energy model and the power model can be as much as about 20%. I do not recognize the 60% number, but if you have got something you can share with us, I will definitely share that with our engineers. At the moment, we see about a 20% discrepancy.
We, as we run the modeling, will then play that back and test that with the likes of the Bloombergs and the Commission on Climate Change on their model to help develop their model, but also to help refine ours. This is why I make the point that we are on a managed transition. This is not a cliff edge. There is doing, reflecting, revising, do more with the benefit of that knowledge. It is not a perfect solution and never will be, but it is iterative, and we will continue to iterate as we learn more as we go through the journey. I hope that better or helps answer your question.
Thanks, Graeme. Jake, I do not know where the odds are, but actually, we have had a few different US questions come in on the webcast. I was going to bundle them, actually.
It is about sizing the growth. We talk about the plus $400 million of investment over the next few years. In particular, there have been a couple of questions around the potential for growth in fleet advisory service, what proportion of your EV business it may cut. I think in the slide pack, we also talk about public and workplace programs and residential programs as well. Can you just give a little bit of a breakdown around how that investment works and what the outlook for each of those buckets is over the next few years?
Absolutely. Just to add to Graeme's comments about management and infrastructure, I think that the same applies to the U.S., right? We see it as a combination of building infrastructure to support additional loads and managing those loads to optimize the usage of the grid.
In terms of fleet advisory services, yes, I guess what I would say is right now, serving fleets and electrification of fleets is probably the smallest piece of what our current programs that we have up and running today are focused on. In the future, we actually expect it to become potentially the biggest. That is because of what I said earlier, around fleets can create very quickly, very large, and very concentrated loads. That requires a lot of planning and a lot of collaboration with us, with the distribution utility. Just to clarify, we do offer fleet advisory services today. It is not a profit center for us, right? It is a service that we offer. We do get cost recovery on offering those services.
Essentially, we look at it as opening the door for those customers because when we talk to fleets, many of them are interested in electrification but do not know how to get started. We offer a service that gives them a pathway. What does the total cost of ownership look like if they compare their gasoline or diesel vehicles to electric vehicles? What are the models that are available to them? How would they manage their charging? We offer those services. That is also a pathway into our make-ready programs, right, where we are actually building infrastructure to support their charging stations. I will just give folks a sense of scale about how fleets today stack up to the charging programs we offer for public charging, workplaces, multi-unit dwellings, things like that.
In the plan that we submitted yesterday in Massachusetts, we've proposed that we would provide make-ready infrastructure support for about 7,500 public and workplace charging stations and about 600 fleet charging stations that would enable a few thousand fleet vehicles. Again, it's something that we're very interested in, and it's going to increasingly become a core part of what we're doing. In terms of the market need today, more of that is on the public workplace and residential side.
Brilliant. Thanks, Jake. Just sort of time, we've got five minutes left. We've still got loads on the webcast, but I'll do one on the webcast on returns, and then I think we've got Martin waiting on Zoom. On returns, we had an email from [Tinica Fricke at Waverton]. Can you please share more about how returns may be earned in the U.K.?
Would this be similar to the mechanisms in the U.S.? Maybe, Jake, actually, if you just start and give a quick recap on returns in the U.S., and then Graeme, if you can talk a little bit about how we earn in the U.K.
Absolutely. There are essentially three sort of pathways to earning on our EV programs in the U.S. today. The first one is one that you'll all be familiar with. It is essentially around building infrastructure, rate-basing it, earning a return on it. We look at that as the make-ready infrastructure that is on the utility side of the meter. Again, this is stuff that we do all the time, service drops, transformers, etc. The next way that we can earn is through a performance incentive mechanism. An example I'll give here is with a managed charging program that we've proposed in New York.
Essentially, this program would be we would offer customers a subscription pricing plan. For all of their EV charging, they would pay $20-$25 a month. That would essentially lock them into a price, give them some price certainty. If they're comparing their electric fueling with gasoline fueling, it gives them a really good sense of what they'll need to pay. In exchange for that subscription, though, we are able to take load control of when they charge their vehicle, right? It helps do some of that smart charging that Graeme was talking about earlier, where Graeme, being a conscientious citizen, is out there making sure that he's charging only the times that are best for the grid and the greenest. This actually allows the utility to play that role and spread those benefits over a much greater number of customers.
What's the key thing that's missing in a program like that, right? There's no infrastructure that we're building there. What we've proposed in New York is a performance incentive mechanism that basically says if we're able to create a certain quantifiable level of customer benefit by getting a certain number of customers enrolled in that program, we would earn a shareholder incentive similar to how our energy efficiency businesses function, if folks are familiar with those. The last thing I'll mention is also on the make-ready infrastructure side, but it's for the assets that are on the customer side of the electric meter. These are assets that customers will own, but they need our support to build or to incentivize them to work with a contractor and build.
For these assets, we've actually reached an arrangement with our New York regulators and proposed the same thing in Massachusetts of treating those incentives as a regulatory asset. In other words, we're able to amortize that rebate that we're paying to a customer and earn our regulated rate of return on that. It ends up spreading the bill impact for all customers out over a longer period of time and lowering the immediate bill impacts. The customer who's actually getting the project gets their rebate, and for National Grid, it creates a return opportunity.
From a U.K. perspective, there are two, I guess, constituent parts when we're looking at transmission connections. A lot of the connections are in the distribution level, and there will be a few targeted ones in the transmission level, particularly on the motorway network. There are two portions to that.
There's the customer-only element, okay, which is delivering the site-specific or the customer-specific piece. Then there's our traditional regulated asset-based model. If I take this much higher, if you look on the Commission on Climate Change's pathway to net zero, twice the amount of energy flowing consumed, four times the amount of renewables, twice the grid, that regulatory asset-based model looks like a pretty solid growth model over time. We know through the regulatory price control that in RIIO- T1, we were allowed to make greater returns. In the current price control, the regulators clipped our wings a little bit, so they reduced our returns. We do not know in the future what the allowed returns will be in the future price control.
This is where trying to understand what is happening in the early uptick in electric vehicles will actually put us in a much stronger footing to work with the regulator and appropriate returns for the next price control because that's when the really heavy lifting will be done on infrastructure growth. It is the traditional regulated asset-based model as a price regulatory monopoly in the U.K.
Thanks, Graeme. That will lead us to the final question that we're going to be able to have time for today. Martin Young, investor on Zoom.
Yeah. Hi there. Hopefully, two very quick follow-ups to what's just been said. Any scope whatsoever for any of this to sit outside the RIIO mechanism, Graeme? The second one is you've talked a lot about smart charging. If you look at FERS, FERS also talks about vehicle-to-grid.
It has vehicle-to-grid somewhat lagging smart charging. Is that a position that you think will persist going forwards, or are there things that can do to close that gap between smart and B2G?
Thanks. Let's pick this in reverse order. Previously, actually, let's pick into detail. When we talk about the transition to net zero, we're going to have much more variable generation on the grid and much more managed consumption on the grid, right? Smart and flexible are going to be absolutely critical watchwords for running the system cleaner and greener and ultimately net zero. When we've seen pre-legal separation, lots of work was done with the ESO before they became the legally separate ESO. The broad working assumption is we can get to about 80% vehicle penetration just with smart and managed charging.
When we start to think about vehicle-to-grid, there's a few things that come to play, really. The first one is vehicle-to-grid tends to be very overheated, in my opinion, because it's an engineering answer to an engineering problem. You've got a big battery, and energy generation and flexibility is the right thing to do. The thing that often gets missed in those scenarios is one who owns the battery, who controls the charge, who benefits from the flexibility, and who pays for the wear and tear on the battery. At the moment, the only vehicle that can do vehicle-to-grid is Nissan's electric van and their Leaf. They add complexity, and they add risk, and they add cost. People forget human behavior. I plug my car in once a week to charge.
If I only plug it in once a week, it's only visible once a week to be visible and controllable. I think there's some concern when we talk about vehicle-to-grid in its pure terms. I think, however, smart charging and second-life batteries—so once the car is dead, the battery still has life in it—you could see manufacturers repackaging those, and it's a waste for them, so it's an avoided cost. You could end up seeing batteries stuck under the cupboard under the stairs or in the garage. They're obviously permanently connected, perfectly visible, permanently controllable. My watchword really around this is flexibility is key. When we talk about vehicle-to-grid, don't automatically assume that it's on four rubber tires. It's the flexibility associated with EV charging. You could have the battery in a charger. You could have battery swaps. I hope that answers that one.
You had a first one. What did I miss on the first one? Your first part of your question?
Yeah. Any thoughts about when and any of the sort of the reinforcement expansion of the grid will fall outside the RIIO mechanism and effectively be thrown to the vagaries of competition?
Yeah. Crikey, Ofgem, I always love to wave a flag of infrastructure competition. We have seen them talk about CATO, competitively acquired transmission ownership. We have not seen anything come forward yet. I think in the journey that we are on at the moment, there is such a lot to do in the offshore space to get 40 GW of offshore wind connected. I suspect that it will be some time before they really get into the nuts and bolts of CATO.
We are, though, working with Ofgem around the mechanisms around either a net zero reopener associated with a faster shift. They also have uncertainty mechanisms. That is within the existing regulatory mechanisms, but where there is opportunity for outperformance or different performance within that. I also think that there is an observation that we have lost a lot of the outperformance incentives from RIIO-T1 to RIIO-T2. I think Ofgem are realizing that they quite like to have a nice stick to beat us with and the chance to outperform. I half suspect that some of the learning will feature in the next price control. Still within the regulatory environment, I think there will be greater opportunities to outperform, particularly around the value delivery in time.
It is one that we certainly have to watch out for and one that we will be engaging with Ofgem and BEIs around Ofgem's remit. I hope that helps.
Thanks, Graeme. Jake, on vehicle-to-grid?
Yeah. Just a little bit more U.S. color on V2G. I think a good reminder for folks, and we get asked about V2G all the time and talk about it a lot. Certainly something that's on our radar. The market is so nascent that when we talk to customers, they're even still just trying to figure out, "Okay, what's the charger port that I need to charge my vehicle?" Right? One of the things we're trying to do is keep things simple at this stage of the market and try to accelerate it and then work into things like V2G.
I also think it's worth noting that there's sort of a generation before V2G. Some folks affectionately call it V1G. That's really around getting many of the same benefits you would get with V2G just by throttling charging speed, right? Managed charging, and instead of trying to backfeed a battery onto the grid, you just decrease the rate that that battery is charging or charge at a different time. Many of the same benefits, although to a lesser degree, can be found that way. The last thing I'll just mention, one of the things we are really, really excited about in the U.S., and may end up being sort of the best potential application of V2G, is with school buses, right? You can think about school buses have a much larger battery than a passenger vehicle. They're much more centrally controlled.
Most importantly, many of them are not operating during the summer when things like solar output are at their highest. If you think about trying to smooth the duck curve and shift that solar output from the middle of the day when it is actually being created, to later in the day, when the demand is much higher, a big fleet of electric school buses could be extraordinarily useful for that. That is something we definitely have our eye on here in the U.S.
Brilliant. Thank you very much, Jake. Thank you very much, Graeme, for your time. Really appreciate that. Look, with that, I just want to take the opportunity to thank you all for joining us today. I hope you found the session useful.
All the material from this event, as well as our two previous Grid Guide to events on the future of gas and on our people, can be found on the IR website. Whilst we have not been able to get through all your questions today, we will look to find other ways to answer them in other formats in the days and weeks ahead. If you have further questions, please do feel free to reach out to the investor relations team. I hope you have a great rest of the day, and we look forward to seeing you soon for the next instalment of our Grid Guide to series. Thank you.