National Grid plc (NG) Earnings Call Transcript & Summary

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. So it gives me great pleasure to welcome you all to our third installment in our Group Guide to Investor Series this time, focusing on the decarbonization 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 2 of the presenters that you'll see in the video. To ask our speakers a question, please join via our Zoom link using the instructions under the Ask a Video question tab, or alternatively, you could submit a question via the text box at the bottom of your screen, which I'll read on your behalf. So 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 To series. Thank you for joining us. Today, the focus is on decarbonization of transport. Over the next 30 minutes, you'll hear from experts across our U.K. and U.S. businesses about the ways we are decarbonizing our own vehicle fleets. But 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. And the focus isn't just on cars. We're looking at infrastructure solutions to enable a decarbonization of all types of transport no matter the scale or the complexity from cars and vans to buses, HCVs 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 on air quality. So 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 ultrafast charging network, providing easily accessible charging points and reducing range anxiety. But you also hear about how we're engaging in the government's broader transport decarbonization plans. And in the U.S., you'll hear about how we're working with all our stakeholders on programs that are delivering EV charging courts across our jurisdictions to residential and business customers as well as encouraging 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 decarbonization of transport and the critical role that we're playing at the heart of the energy transition. And we really look forward to you joining us for a question-and-answer session with our experts after the presentation.

So the pathway to decarbonizing transport is actually pretty complex. There is no one silver bullet to fix transport. So as National Grid and my responsibility within National Grid is looking at transport as a whole. So we can broadly divide that into 4 things: road, rail, aviation and maritime. So let's focus on those in a few areas. So the fastest-moving, the one that's moving and maturing most quickly is road transport. So we already have electric cars on the road. We have benefiting kinds of company cars are going electric. And we've already seen signaling from government to the end of the sale of petrol and diesel cars by 2030. So 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. But 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 infrastructure follow those strategic routes. Thinking further into rail, rail has been a customer of National Grid for quite some considerable time. So it's just further evolution of a mature customer relationship. Looking a little further forward into maritime and aviation, these are 2 areas we've not touched before as a business. But in the 6th 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 hasn't got bigger, but there are more calls on that budget now. So the things that can go faster, will go faster because we need to buy us time as a country. But it will also mean we'll 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're going to need roughly twice the amount of electricity consumption that we have today. That means we're going to have 4x the amount of renewable energy to -- energy generation to deliver that. And that means we can need roughly twice the grid. So 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? Well, 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 in the road this year. So it's growing. We're on that exponential curve. But with the growth in renewables, so growth in more variable energy, we actually need the growth in smart consumption, so the ability to use the renewables when they're most prevalent. And that means that at both ends of our wire are critical, the upstream primary generation and the smart downstream consumption in transport. So one of the most regularly asked questions of me, and it's one of those misses the grid can't cope with the transition to clean transport. The grid has never been static. So firstly, the grid has always evolved to suit the changing energy demands and power generation demands of the country. So 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. So 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. So 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. So that listening, that asking and being responsive is incredibly important. So 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. So the executive in the U.K. have signed off on an alternatively fueled fleet by 2030. And again, we're not picking winners here, right? Fuel for the right job. But we now have a company car policy that says, "Benefit cars can only be electric from April this year." We're also working on how we will take the next steps for the more difficult-to-fix fleet. So we have off-road 4-wheel drive vehicles. There's not a product today that we can buy. But we're 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. So we're learning by doing as a business as much as trying to enable the rest of the country on the journey to net zero. So what is National Grid doing to enable the transition to clean transport? So firstly, we are the critical enabler of that transition because we don't make electricity, bioelectricity is still electricity, we don't make gas, buy gas or sell gas. But we are the conduit from where it comes from to where it's consumed. So we're critical in that process. What we realize is there needs to be legislative change, policy change and regulatory change to facilitate that journey. So what National Grid has been doing is using its size, scale and power for good. We've been asking the transport sector, what is it they need. They've been telling us what they need, and there are some strong themes come out of that. We've taken what we've heard and played back 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. So we've been trying to use our power for Good, be a critical friend to government and policymaker and make sure that we're the enabler of that transition. So historically, National Grid has engaged with the energy sector. Now that's normally the Department of Energy, the 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're looking to get the whole country cleaner and greener through both electricity and hydrogen. That means we're that critical enabler. And what we're 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 3 challenging sectors together. We're bringing energy, transport and digital. Successful deployment and the transition to net zero needs those 3 technologies. So we're engaging with critical government departments, They're aligning around the solutions, and it means that actually, we've been playing a very different role helping form policy, which we can then respond to as an industry. So National Grid has been using its power for good. And the best way to describe that is we've been helping government with their Project Rapid strategy. So 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 carmaker, 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 0 strategy. And that's now led to a GBP 950 million fund from government's Treasury to actually deploy that. So we're looking to see that end to end over the last 2 or 3 years to actually having grid connection applications to future-proof the road network. So looking further ahead, maritime and aviation are in the distance, but it's really important that National Grid engaged with this. So in the 6th carbon budget, we're counting, shipping and aviation as a country in those budgets. So 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 will 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. And long haul can't be fixed by hydrogen or electricity. So what is National Grid's role there? Well, if you're making a synthetic fuel, it's very energy intensive. That is where National Grid will be playing a role in that. So will the 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. So are we going to need to make sure that all the air fields in the country have robust grid connections? These things take time. So we'll be working closely with the aviation sector and, more specifically, government's Jet Zero to make sure we're on hand to enable that transition. When we think about shipping, particularly, at the moment, shipping is very heavy fuel. Now there's a lot of debate as to is there a stepping stone, which is liquefied natural gas or is the answer ammonia. But either of those, there is a role for National Grid to play. So shore-based power initially and then refueling those vessels. We've not really had big grid connections at those coastal ports. That is going to be a function going forward. So working closely with government on their maritime strategy. But then we get 2 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're seeing out 2050. So you see National Grid's role to play in trying to answer the transport problem but also the primary green energy challenge, too. And that's where our role is particularly critical. We're looking forward shortly to the slightly delayed government's decarbonization of transport plan. Now this is really important. We're the first G7 economy to actually have a plan to decarbonize the way we move people and goods. And that's going to cover everything. Firstly, travel less. But then active travel, it's going to talk about road rail, aviation and maritime. So this is fundamental to that journey, and you know that we are a critical enabler of that transition. We've actually been helping government with how is that transition fueled and where does the energy come from. So 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. And so the electrification of transportation is such a huge part of our state's decarbonization 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. So that covers commercial customers, fleet customers, residential customers. In fact, we have one of the largest regulatory approved EV -- 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 an approved -- so far approved 19,000 ports across our service territories.

In all 3 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. And so 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. And so 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're 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. But we're also adding to that and working with fleets. And so we've developed fleet advisory service programs across all 3 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 road map and pathway forward.

We are committed to electrifying the majority of our own fleet by 2030. And finally, we recognize that transportation emissions disproportionately impact folks in low income and disadvantaged communities. So 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. So 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 multiunit 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. And we're really excited to continue building those partnerships and creating new relationships as we look to do this work.

So there's really 3 ways that we can create an earnings pathway around electric vehicles and EV charging and 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. So that's 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. And this is essentially an earnings mechanism that allows the company to earn a return based on an agreed outcome. So it's separate from the investments that the company is making. We do have several performance incentive mechanisms already established today in Massachusetts and New York. And our Massachusetts performance incentive mechanism for instance is something we're going to maximize its -- it essentially incentivized us to build a certain number of EV charging stations over the last 3 years The goal for that was 680 charging stations. We're already above 680 charging stations. And so we're on pace to maximize that performance incentive mechanism. The last earnings pathway that I'll 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, so on the customer side of the electric meter. This is something that's really important to this space. A lot of the customers that we talk to are interested in becoming site hosts, can't afford to build this infrastructure that will interconnect our EV charging station because it's expensive to build and there are just not enough EVs that charge that charging station to make it worth their while. And so 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'll 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've either gotten approved or proposed more than $400 million in investment over the next 4 years in the U.S. And that's 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. And so the infrastructure investment required during that period will be very, very significant as well.

But 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's 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's a lot of education and awareness that's 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. And it's also a huge source of customer value and business growth. We know we have good line of sight to the customer offerings and infrastructure we'll need to build in the next 3 to 5 years. And 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 road map and a true game plan to how they're going to electrify. We know that will change in the coming years, and National Grid is going to be ready to build the infrastructure to support them and offer products and services that can support those vehicle fleets as well. So 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's 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'm 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've just seen in the video. So as a reminder, to ask a question, please join via Zoom using instructions under the Ask a Video Question tab, and raise your hand, or alternatively, you can submit a question by the text box at the bottom of your screen, which I will read on you behalf. The aim of the Grid Guide to series is to hear our experts talking about the critical work they're doing to enable the wider energy transition. With that in mind, please can I ask that you keep your questions focused on the decarbonization of transport for our experts. And 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's not possible for us to talk about or take any questions on the transaction. So with that said, we're going to go to our first question, and I think we have some coming through on Zoom. So I'm going to hand over to Dominic. Dominic, I can see you.

Does this work? I'm the first one on. 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 -- curious as to what your views were on the role of the hydrogen versus power on the decarbonization of transport. And second one, people who are a bit more sort of -- maybe a little bit more techy, but 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 3-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 the U.K., shall we? Graeme, you happy to start that?

Yes. No problem. Dominic, great to meet you, and good questions. Thank you. So when we look at hydrogen, let's pick that one first. So for cars and light vans, that is generally electricity is winning, right? It was a competition. We cannot get to net zero without hydrogen. But when we look at the hydrogen need for transport, particularly road vehicles, let's focus on that now, they use fuel cells. So hydrogen fuel cell needs very, very clean hydrogen. Otherwise, you kill the membrane in the fuel cell. And therefore, for refueling purposes, you are likely to make the hydrogen through electrolysis. So that's an electricity play. So that's power to gas, so obviously passing a current through water to create hydrogen. And you're likely to end up making it where you need to refuel. So that means in all of these, in the modeling work and the engineering work, it doesn't matter whether the -- you're talking about a battery vehicle or you're talking about a hydrogen vehicle or you're talking about even over sort of overhead catenary like the trains. What we can agree is that you need adequate, future-proof grid capacity space along the strategic road network to allow any one of those 3 to come forward. What you'll likely see around hydrogen in the transport space will be, to some extent, picking technology. So when we think about HGVs, if it's a lighter truck, you're an Amazon parcel truck, that's high volume, low weight. So that lends itself naturally more towards electricity and your battery-powered truck. If we're looking at a very heavy payload where volume is not a challenge, then it's more likely to be a hydrogen truck. There is no single magic bullet fixing this. The answer is both. So that answers, I hope, the hydrogen challenge and maybe a bit of geography around hydrogen as well in that we have -- gives us hydrogen hotspots around the country where your industrial clusters, where the narrative is more around hydrogen. So 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's 2 pieces very quickly. Upgrading 3-phase to every home in the country, I think, feels like a little bit like overkill. But I do know that if you look at the ED1 -- ED2 business plans from -- that the distribution companies are putting in, there is an element of upgrading last mile there. But don't forget, SMART is going to get us quite a long way there. So we saw in the government's transport decarbonization plan yesterday, I mentioned it 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. So actually, just managing the charging may well help avoid some of those upgrade costs. It doesn't mean there won't be grid upgrades, but it will be optimized investments as opposed to building to peak plus headroom. So it will be interesting to see how the regulator plays out on this, but it's one we're 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?

Yes. Thanks. I think much of what Graeme said would apply to the U.S. as well. Maybe 2 things I'll just add on the hydrogen front. I think number one, I think Graeme said this in the video but important to reiterate, we're essentially technology agnostic, right? So whether you're fueling your vehicle with electrons or you're fueling it with hydrogen, National Grid is 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, something that's pending approval but definitely something that we're looking at.

Perfect. Thank you very much, Jake. Dominic, are you -- your hand is raised. Are you -- is that good.

Yes, it is.

Perfect. Thank you. I think then the next question, we'll keep on Zoom for now, Martin Young, Investec. Martin?

Yes. 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 shouldn't really be concerned about as people move to increase the uptake of EVs and, indeed, heat pumps? And then 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 decarbonization plan that came out yesterday. I was cycling past [indiscernible] the other week, and let's just say those wires aren't that esthetically pleasing. As I rode past it, I wondered if they were going to be taken down at some stage. But 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?

So, yes, let's take those up in 2 cases. So, yes, I'm probably an extreme case at home. So I live in 100% electric home, so I have an electric car, a plug-in hybrid, I have ground-source heat pumps. I guess I'm in the extreme case. We built an annex in the garden, which needed more power. And I'm only -- really, I'm only 1 of 3 EV owners, and it's the 3 houses immediately here. So, yes, I triggered an upgrade, and actually, that was done in about 8 weeks. Slightly more painful than I was expecting to be on cost, but we're still talking to SSE about that. But it is doable. It was reasonably foreseeable. It didn't limit my charging. It meant I was sharing one charger for 2 cars. But hey, I charge my electric car once a week, maybe twice a week. I charge a plug-in hybrid most days. So it wasn't really a challenge in that sense. Let's pick up around things like [indiscernible] and visibility. So there will be more wires required between now and net zero, as I said in the video. The Committee on Climate Change is balanced pathway, which is the sort of central proposition, broadly says twice the amount of grid capacity we have now. Now that's not twice as many runs. That can be thicker cables on existing pylon runs. It can be buried cable. So it's not a case that you'll 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, so which is a regulated 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 a 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 gigawatts offshore wind, so I know it's 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. So 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. So if there is a visual [indiscernible] 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 consentible 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 nearer now, which is more sort of regulating in spite of net zero. It's the way they regulate to date. So Jonathan Brearley, the boss of Ofgem, has absolutely signaled that they're looking to evolve the considerations that Ofgem counting those. As far as where those wires are today, there is a requirement for us 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 the -- getting the additional connections? Do you see this as a short-term impediment to the take-up of electric vehicles and heat pumps? Or are you confident that, should we say, the DNOs have the necessary capabilities and capacity at this moment to do what's needed when it's needed?

So, yes, so what we're seeing right now, talking about the DNOs in general is, obviously, they have just started to submit to Ofgem, and obviously a lot of them publicly, on their RIIO-ED2 plans they are quite aggressive and punchy with the uptake in EVs, and they asked 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. So as it comes down from 400,000 volts to 275 and then down to 132, which is the -- where it changes from transmission to distribution, those boundary points become quite critical. And so 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've signaled well in time to work on the upgrade of those boundary points. So to answer your question, will it be okay, I'm pretty confident they'll be okay. But this is -- don't think, as I said in the -- 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? So thinking about any bottlenecks, thinking about as 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 road in the U.S.? Can you talk a little bit about what we're seeing in real time?

Absolutely. So 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 up that hockey stick curve. And so today, we don't 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. But we know a lot of system investment is needed, and that's both on our distribution system in the U.S. and the transmission system. One thing that I'll 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're thinking of light-duty passenger vehicles. It's very spread out. You might 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. But 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's where you could see very highly concentrated, very high demand very quickly if that fleet decides to electrify. And so we're 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 road map? 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, well, let's start building the solution for 2030 now because it will take us that much time, in some cases, to build out the infrastructure that's needed." So 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.

[indiscernible] me to jump in as far as this thing isn't -- this transition isn't seamless, right? And we've already seen market failure by which government has acknowledged and intervened. I'll use the example of the motorway service areas. So motorway service areas in England are halfway between somewhere and somewhere else. So 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 in motorway service areas has struggled because hybrid connection costs poor certainty of utilization. So 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 would you overcome that range anxiety, they've agreed and come out with a policy called Project Rapid and a GBP 950 million Project Rapid fund. Now 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 6 ultra-rapid charges by 2023, 2,000 plus by 2030 and 6,000 by 2035. Now, typically, your motorway service area, just you want to get into the numbers, it's about a 1-megawatt grid capacity. Now that will serve you burgers and pizzas and fruit machines, which is what you have today. Just 6 ultra-rapid EV chargers needs a 1-megawatt, 1.25-megawatt grid connection. If you're going to future-proof for what cars need, you're going to need somewhere like an 8- to 10-megawatt 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-megawatt grid connections. So 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. So it's not doing the charging itself. That market is really, really liquid. But it's the trying to commit to a bigger grid connection for a great period of time is very difficult for what is actually still a relatively nascent market. So this isn't seamless, but where there is a failure, observations have been made, and targeted intervention is being programmed and planned. And we're likely to see the first grid connections on a mixture of big distribution and transmission connections that are likely to happen probably this autumn. But that's a 3- or 4-year delivery period to deliver all those future grid capacity. Hope that helps.

Thanks, Graeme. And I think we are going to stick with Zoom and go to Verity Mitchell with HSBC. Verity?

So I didn't have a question, actually. But now you've given me the floor, I think I would just -- but the issue that I -- similar one to Martin is the prohibitive cost of -- that I'm seeing from some of my neighbors trying to install charging ports in their houses. And it is costly, and you mentioned 6 weeks. But do you think that is going to slow the process down? So that would just be my observation from talking to people very much backing up what's already been said.

I mean just a couple of things. So the government, yes, they committed to the plug-in car grant. So 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 in a 13-amp, 3-pin socket. It just takes a chunk longer in time, and you have to be very careful with that. As far as upgrades, the -- 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. So we -- there's a [minded-to] position from Ofgem, and obviously, a [minded-to] position has to then go through the legislative process. So one of those things I think we will see in the not-too-distant future is much, much lower cost for distribution demand connections. Now I appreciate I'm coming from a transmission perspective, but that's certainly what I observe as a change in the market. So things are likely to improve as we move forward.

And if I could just add...

Sorry. Yes, go ahead.

Go, Jake.

Yes. Just to add the U.S. perspective on this, where we do have a distribution presence. So 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. And so one of the things that we 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, but it's essentially a turnkey solution. So 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 2 EV charger. We will also subsidize some of that cost, right, because the goal is to get more EVs on the road and more EVs charging on our electric system. And 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. And so 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. And I think we are sticking with Zoom and to [ Joseph Farone. 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. So thanks for the question. Good to hear a fellow American accent. So 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? So with our distribution in the U.S., our retail business that's direct to customers and 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. But 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 decarbonization of transport are things that we can learn from here in the U.S. And we've 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've 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 didn't go so well, and we've built our programs with that influence. And so there's -- there are plenty of lessons to be learned. And I think we're also very optimistic that at least in the Northeast, we're on the road to catching up to other parts of the world in terms of EV adoption pretty soon.

Thanks, Jake. And Graeme, just on the back of that because we talked about the U.K. being a bit ahead of the U.S., but the U.K. is certainly not necessarily the world's leader here. So where are we getting learnings from in the U.K. as well?

Yes, certainly. So it's -- yes, a good question. So the -- if you look across Europe, actually, the most advanced is Norway, okay? So a very energy-literate country, 98% run on hydro but huge gas -- oil and gas reserves. They've gone much, much earlier on their bands. I think they're somewhere deep into that. 60% of all car sales are electric already, and that's moving very, very quickly. So we've looked to some of the things that are working there and some of the things that don't apply that. I mean obviously, it's a very socialist country. So everyone is equal. There's universal decisions on these things. So we look to Norway for examples. We look to -- and we've looked to California and seeing some of the early learning there. The one thing we do -- and it's 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 4 rubber tires. They've never had to think about what goes in it before. And so 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. So they've been very generous with their hopes, fears and business models. But then that has allowed us really efficiently to see some of these failures, and that's what we've been playing into government, as -- a best way to describe it, as government's critical friends. And that's why we've been helping shape and form policy. And the one thing a big, price-regulated monopoly responds well to is policy. So we've 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, so the transport decarbonization 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. So we had a -- there were no sharp intake of breath moments with any of those documents, nothing -- no surprises, which is always a good thing to do when you're seeing policy being delivered. But yes, asking, not telling, engaging with policy and ensuring that we are that enabler because if we're not an enabler, you could argue that we're a barrier.

Brilliant. Thank you very much, Graeme. So Chris Laybutt, 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. And I feel like we're monopolizing through Zoom. So the first one is from Sam Arie at UBS. It's a bit of a long one, very unlike Sam but -- the content of this presentation is fascinating. Thank you. Thank you, Sam. But 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 base impacts for the grid? So 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, start in the U.K.?

I'll happily dive in from a U.K. perspective. We are obviously, as you appreciate from those with the U.K. lens, we're in the RIIO-T2 period. So when we were forming RIIO-T2, there was too much uncertainty around what the uptick in transport decarbonization was going to look like. So we didn't put a lot of detail in. What we are seeing in discussions with Ofgem now is that 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. But 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. So we are just really seeing it's down mainly in the distribution level. So 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. And so making sure that the RIIO-T3 or whatever it ends up being ultimately called, we're in a good -- in a robust place to make sure that we capitalize on delivery and outperformance. So unfortunately, I can't give you a number because as I see, we're seeing a 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. So I can't really give you some hard numbers. But we're absolutely watching this like a hawk. But if -- 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 needs to look like by 2050 based on the scenarios. So 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. Then it's just a challenge of responding to the uptick in the change in those markets. So a great deal of uncertainty as to the 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. So it's 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 decarbonization transport plan. And then in the U.S., we filed our largest proposal ever around clean transportation. It's in our Massachusetts jurisdiction. This is a $278 million total investment that we've proposed over the next 4 years. And so just to give you a sense of scale between programs we've proposed or actually already have approval for by -- between now and 2025, our total investment will be more than -- significantly more than $400 million and much of that being capital investments or regulatory assets that we earn our regulated rate of return on. And remember, out to 2025, that's 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's not enough EVs out there to charge them. Much of our investment will help solve that chicken or egg problem by getting the chargers out there, making the business model penciled out for charging -- EV charging site hosts. That will, in turn, spur EV adoption and there will be a virtuous cycle created. And so 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's where you'll start to see even more significant investments and, in many cases, more traditional capital investments.

Brilliant. Thanks, Jake. Now another one from the -- from online. We've got [ Styne ] from [ Norges ]. Just going back to hydrogen at the beginning, so 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'll try and explain. So 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's the solution we'll ultimately end up with. When we model for that, there are a couple of things that play out. You realize the value of flexibility. So time of use is important. If you're going to use -- I mean it -- actually, let's pause for a second. We are seeing -- getting to 40 gigawatts of offshore wind by 2030 is part of the other job that I have within National Grid, going from 10 megawatts -- 10 gigawatts now, which has taken us 20 years to get to, to 40 gigawatts by 2030. So 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. So the -- one of the things that we're seeing in and around hydrogen is the argument is it's less efficient, round-trip efficiency, using electricity to make hydrogen, to put it in a vehicle, to send it back to electricity for forward motion. But that relative efficiency falls away when the commodity is spare. We're also starting to see those doing electrolysis thinking around avoided cost. So 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 so that relative efficiency could fall away when we have more price volatility in the energy market. As far as grid charges -- so 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. And therefore, those plugging into it are likely to be somewhat divorced from the grid connection costs. Now that will help the inter-site -- on-route refueling for want of a better term. We do know that at least the distribution level demand charges are being reviewed as a monetary 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. So at the moment, there's not a really clear path around avoiding grid costs, but there are a number of value streams that sit around hydrogen around the flexibility pace and avoided costs in there. So 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. So 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. So there's a price arbitrage sort of play in there. But as I say, there's 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. So there are some interesting plays in the dynamics of that market. And that's why -- National Grid is technology-agnostic. It's not picking winners. We -- for us, it's about facilitating the journey to transport decarbonization in whatever form that takes.

Brilliant. Thank you very much, Graeme. So I think we're going to go back to Zoom now. Chris Laybutt from Morgan Stanley, thank you very much for your patience.

No problem. My question was really very similar to Sam's. So I won't ask it again. But just in terms of the path from now to 2050, do you think we're on the right track at this stage? Or do we need to accelerate to -- within the sort of realms of the acceleration that you're currently anticipating in the next sort of 5 to 10 years? Or do we really need to start to accelerate a lot more to get there? So 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 your feeling would be terrific.

Yes. Certainly. So I'll dive in if you don't mind, Nick. That's a really, really good question. And 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. So if it goes faster, we'll respond faster. So 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. So if you look at the uptick in home video recorders, that was a hockey stick; the uptake in games 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. And so you could argue today that we need to be moving further, faster, but there is an element of having greater certainty around the outcome. And so by having these clear policy objectives being set yesterday, I think what we will start to see is better, industry-making, lower-risk decisions. And 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. So 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 game. So 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. So 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. So I think that increased confidence will certainly help make the market move at pace, but 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. So 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 that hockey stick is coming forward, but I think we'll really start to see that in the coming year, 18 months, 2 years.

Jake?

So to add on to what Graeme said, I think the -- if I could hopefully not be too cheeky about the response. But the idea of if -- are we on the right path today and do we need to accelerate dramatically? I think the answer to both of those is yes. And I think the pathway 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 when you -- the time line you asked that -- 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. And at the same time, in the U.S., we've hit an all-time high for vehicle age. So people are hanging on to their cars much longer. And so the turnaround cycle that -- the replacement cycle that we have to replace those EVs to 2025, which again is just a starting point, and then to 2030 into 2035, where these goals get much, much more ambitious and much, much more aggressive, there's not a lot of time. But 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.

And Jake...

Comfortably uncomfortable. That's a great one. Sorry.

And 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 an impact -- any impact on the uptake of EVs? Has that slowed anything down in the near term?

Well, a good news story that came out of COVID was that while we saw vehicle sales overall declined significantly during the pandemic, electric vehicle sales actually improved during the pandemic in the U.S. And so that was a positive outcome, right? EV sales were not as affected by the pandemic. And 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 didn't have employees or students or customers in their -- at their facilities took the opportunity to do construction work during that time, right? It's much easier to dig out the parking lot if there's nobody parking in it. And so we actually saw some uptick in our EV charging programs and the infrastructure that we're building there. Other organizations, obviously, were quite affected. Their financials and their businesses were quite affected by the pandemic, and so we saw a slowdown. That ended up balancing out a bit. But there were good news stories to come out of the pandemic on the EV side.

Thanks, Jake. Graeme, did you want to jump in?

Yes. There's a useful -- a few things come out from a U.K. perspective. So we're obviously -- principally when we're talking about decarbonating transport, we're talking about decarbonizing and it's the climate change and those targets. But 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. So it's transport that's driving those. So having had the first lockdown, the one thing most people agreed was that weren't towns and cities clean and quiet. So there's a huge driver now around the air quality agenda, and we're seeing it through emission zones. So that's driving uptake. What we've also seen is government doing a couple of clever things in the U.K. to try and drive uptake, too. So 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. And so if you're a company car driving 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. But what's happening more interestingly is that people will often argue that electric cars are expensive. But what will happen is the cars that are being delivered for companies today will become the secondhand car market in 3 years' time. And obviously, under the depreciation curve, those cars are going to be roughly half-priced. So what it does do is it pump-primes the new car sales to go electric. And as we pointed out, National Grid in the U.K., you can only have a company car if it's electric. But that will also then pump-prime the secondhand market with half-priced electric cars 3 years hence. And 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. So the VAT on the more expensive car upfront gives them a take to offset the loss from benefit-in-kind treatment through the 3 years that you have the car. So actually, it's one of those policy levers that looks like it's expensive but is actually net neutral. It has the wider benefit of priming that secondhand market. The biggest limiting factor, if I'm being honest, is going to be the supply of electric vehicles. And 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 commission granted for the Britishvolt factory. We will see probably, I suspect, more announcements around vehicles and battery factories in and around the U.K.

Brilliant. Thank you, Graeme. So going back to the webcast. We've had 4 or 5 questions from [ Steve Brodrick ]. And [ Steve ], apologies. I haven't got this quite right. But if I look at the main takeaway, it 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? And 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 when using winter versus summer? And what do those -- their charge points do in summer when not being used? So it was a U.K. question. I'll start with you, therefore, Graeme. And then, Jake, I'll come to you to hear what's going on in the U.S. as well.

Yes. So it picks up on a number of things. Let's pick up on the smart bit first. So traditionally, those in smart technologies and distributed generation argue that we don't need any more wires. Smarts will fix everything. And the answer simply is that, that doesn't work. It means what you've got works more efficiently, but it doesn't get you out of jail. Just look back to the Committee on Climate Change's twice the amount of electricity consumption, 4x the amount of renewables, twice the grid. But what it does do is often, yes, utility, say yes, just build wires, don't do smart. The answer is both. What we've done in the U.K. over time is we've typically built grid networks to system peak, that half an hour winter, 1 foot of snow on the ground, high demand, low wind and then build 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 optimize as opposed to peak plus headroom. But there's an element of chicken and egg. We have one of the most reliable grid networks in the world. So National Grid in the U.K. is 99.999987% reliable, which is less than 7 seconds a year, and we regularly outperform that. So the answer to you -- to the smart is smart will not get us there alone. Investment on its own in infrastructure is not the right answer. It's -- they will have to go hand in hand. This is why I made the point in the video. We're bringing 3 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 -- so 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 9 per unit and it only allows my car to charge when it's less than 90 grams of CO2 per kilowatt-hour. It does that by taking a hidden fee, an API from energy supplier. It also then takes from National Grid's control room a carbon-intensity API, 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, well, 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 -- well, 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 family does 37 miles 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 miles a day. It is -- if you're lucky enough to have a second car, actually, it does even less. It does 11 miles on average a day. So we use -- distance is much shorter than we really realized. 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 Committee on Climate Change, are energy models. So they look at the volume of energy. What they don't do is they don't look at power, which is obviously the peak demand, which sets the size of the wires. So part of the work we're 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're finding in certain low cases is the difference between the energy model and the power model can be as much as about 20%. So don't recognize the 60% number, but if you've got something you can share with us, I'll definitely share that with our engineers. But at the moment, we see about a 20% discrepancy. We -- as we run the modeling, we'll then play that back and test that with the likes of the Bloombergs and the Committee on Climate Change on their model to help develop their model but also to help refine ours. But this is why I made the point that we are on a managed transition. This is not a cliff edge. So there's doing, reflecting, revising, doing more with the benefit of that knowledge. So it isn't 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 helps answer your question.

Thanks, Graeme. And then, Jake, I don't know whether you want to add. But actually, I think we've had a few different U.S. questions coming on the webcast. I was going to bundle them actually. And it's about sizing the growth. So we talk about the plus $400 million of investment over the next few years. In particular, there's been a couple of questions around the potential for growth in fleet advisory service. What proportion of your EV business does it make up? But then also, I think in the slide pack, we also talked about public and workplace programs and residential programs as well. So 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. And just to add to Graeme's comments about management and infrastructure, I think the same applies to the U.S., right? I think 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, so 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. And that's because of what I said earlier around fleets can create very quickly, very large and very concentrated loads. And that requires a lot of planning and a lot of collaboration with us with the distribution utility. So just to clarify, we do offer fleet advisory services today. It's not a profit center for us, right? It's a service that we offer. We do get cost recovery on offering those services. But 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 don't know how to get started. And so we offer a service that gives them a path. 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? And so we offer those services. That's also a pathway into our make-ready programs, right, where we're actually building infrastructure to support their charging stations. I'll just give folks a sense of scale about how fleets today stack up to the charging programs we offer for public charging, workplaces, multiunit 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. So 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. But in terms of the market need today, more of that is on the public workplace and residential side.

Brilliant. Thanks, Jake. And just conscious of time, we've got 5 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. So on returns, we had an e-mail from [ Tenneco Fricke at Wave ]. Can you please share more about how returns may be? And in the U.K., would this be similar to the mechanisms in the U.S.? Maybe, Jake, 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. So there's essentially 3 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's essentially around building infrastructure, rate basing and earning a return on it. We look at that as the make-ready infrastructure that's on the utility side of the meter. And again, this is stuff that we do all the time, service drops, transformers, et cetera. The next way that we can earn is through a performance incentive mechanism. And 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. So for all of their EV charging, they would pay $20 to $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 were able to take load control of when they charge their vehicle, right? So 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. But what's the key thing that's missing in a program like that, right? There's no infrastructure that we're building there. And so 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. Then 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 meters. So 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. So in other words, we were able to amortize that rebate that we're paying to a customer and earn our regulated rate of return on that, 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 2, I guess, constituent parts when we're looking at transmission connection. So 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. So there are 2 portions to that. There's the customer-only element, okay, which is delivering the site-specific or the customer-specific piece. And then there's our traditional regulated asset-based model. So if I take as much higher, if you look on the Committee on Climate Change's pathway to net zero, twice the amount of energy flowing consumed, 4x 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've reduced our returns. We don't know in the future what the allowed returns will be in the future price control. But 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. So it's the traditional regulated asset-based model as a price-regulated monopoly in the U.K.

Thanks, Graeme. And that will lead us to the final question that we're going to be able to have time for today. Martin Young, Investec on Zoom.

Hopefully, 2 very quick follow-ups to what's just been said. Any scope whatsoever for any of this to sit outside the RIIO mechanism, Graeme? And then the second one is, you talked a lot about smart charging. If you look at FES, FES 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 forward? Or are there things that can do to close that gap between smart and V2G.

So let's take this in reverse order. So previously -- actually, let's pick in the 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? So 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 leading separate ESO. And 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 wear and tear on the battery. So at the moment, the only vehicle that can do vehicle-to-grid is Nissan's electric van and their LEAF. So they had complexity and they add risk and they add cost. But also, people forget human behavior. So I plug my car in once a week to charge. But if I only plug it in once a week, it's only visible once a week to be visible and controllable. So I think there's a -- I have 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, permanently visible, permanently controllable. So my watchword really around this is flexibility is key. When we talk about vehicle-to-grid, don't automatically assume that it's on 4 rubber tires. It's the flexibility associated with EV charging. So you could have the battery in a charger. You could have battery swaps that -- so 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?

Any thoughts about when or any of the -- sort of the reinforcement expansion of the grid will fall outside the RIIO mechanism and actively be prone to the vagaries of competition?

Yes. So crikey, Ofgem always love to wave the flag of infrastructure competition. We have seen them talk about CATO, competitively acquired transmission ownership. We've not seen anything come forward yet. I think in the journey that we're on at the moment, there's such a lot to do in the offshore space to get 40 gigawatts of offshore wind connected. I suspect that there 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 -- is there a net zero reopener associated with a faster shift? And they also have uncertainty [ making ]. So that's within the existing regulatory mechanisms but where there is opportunity for outperformance or different performance within that. But I also think that there is an observation that we've 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. So I half suspect that some of the learning will feature in the next price control, so still within the regulatory environment but I think there will be greater opportunities to outperform particularly around the value of delivery and time. But it's one that we certainly have to watch out for and one that we will be engaging with Ofgem and base around Ofgem's REMIT. So I hope that helps.

Thanks, Graeme. And Jake, on vehicle-to-grid?

Yes. 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, some of it'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? And so 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. And that's really around getting many of the same benefits you would get with V2G just by throttling charging speed, right? So managed charging and instead of trying to back-feed a battery onto the grid, you just decrease the rate that, that battery is charging or charging at a different time. And 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? Because you can think about school buses have a much larger battery than a passenger vehicle. They're much more centrally controlled. And most importantly, many of them are not operating during the summer when things like solar output are at their highest. And so if you think about trying to smooth the duck curve and shift that solar output from the middle of the day when it's actually being created to later in the day when the demand is much higher, a big fleet of school buses, electric school buses could be extraordinarily useful for that. And so that's 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. And look, we guys 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 2 previous Grid Guide To... events on the future of gas and on our people can be found on the IR website. Whilst we haven't been able to get through all your questions today, we'll look to find other ways to answer them in other formats in the days and weeks ahead. And if you have further questions, please do feel free to reach out to the Investor Relations team. So I hope you have a great rest of the day, and we look forward to seeing you soon for the next installment of our Grid Guide To... series. Thank you.