Our ambition – RIIO-2
In our third article this week – where we are publishing our thinking in a number of areas, across both electricity and gas, out to 2030 – we focus on Our RIIO-2 ambition.
The energy sector is undergoing massive transformation. A new energy landscape is emerging, with different types of electricity generation, more parties to engage with and changing consumer behaviour.
Against this backdrop, we need to create a business plan that meets the future needs of the energy market. Crucially, this plan must take place within the context of Ofgem’s regulatory framework, also known as RIIO.
RIIO (Revenue=Incentives+Innovation+Outputs) sets price controls to determine the amount we can earn from the services we provide. The business plan we are currently preparing covers RIIO-2, which runs from April 2021 for five years.
For our newly-created Electricity System Operator (ESO) business, it will be the first time we have prepared our own plan. It is a fantastic opportunity for us to set the direction of the business and our transforming role in the industry. Our business plan will set out the activities that we will undertake, the investments we’ll make, how we’ll innovate to prepare for the future and the performance outcomes we expect to be measured against. In particular, they highlight our ambition for the electricity system to operate carbon free by 2025.
Our RIIO-2 ambition reflects what we have learned from stakeholders to date. It is also informed by our annual Forward Plan, which describes the benefits we will deliver to benefit consumers up to the start of RIIO 2 in 2021.
We will share a first draft of our business plan later in 2019, before publishing a final proposal in December. Next year we will negotiate with Ofgem and our stakeholders, and Ofgem will publish its final decision on price controls by the end of 2020.
Our business plan reflects the challenges we face in transforming our industry. It will allow us to create networks fit for the future and ultimately deliver the benefits of low carbon.
For more information, read our previous two articles published this week: Zero carbon operation of the electricity system by 2025 and Towards 2030 – a System Operator for GB’s energy future.