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National Grid National Grid –– An Energy Utility In TransitionAn Energy Utility In Transition

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Bruce J. WalkerVice President, Asset Strategy & PolicyNational Grid

UK Electric

National Grid Overview

CustomersUS – 8 MillionUK – 11 Million

Pipes & WiresUS – 125,000 milesUK – 215,000 miles

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UK Gas

ELECTRICITY

� 195,000 km of distribution network

� 4.4 million customer connections

� Interconnectors� 2000MW HVDC link -

UK and France� 224km HVDC link -

Canada and USA� Constructing 260km

1000MW HVDC link -UK and Holland

�One of the densest, most complex and integrated transmission networks

� 31,000 km of transmission network

�Over 1,000 substations

� 4.1GW of generation across 15 locations

LNG,

National Grid

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GAS

� 182,000 km of distribution pipelines

� Over 13.5 million customer connections

� Metering service for over 20 million meters

� LNG import facility, 3.3 million tonnes of LNG pa, by 2012 14.8 million tonnes – 20% of UK demand

� 6,900km of high pressure pipeline

� Seven coastal terminals

� Connecting to 8 distribution networks

� 26 major compressor stations

Distribution

LNG, Interconnectors and metering

Transmission

Generation

National Grid Transmission

� National Grid owns the high-voltage electricity transmission system in England and Wales and operates the system across Britain. It also owns and operates the high-pressure gas transmission system in Britain. In the US, National Grid is one of the leading electricity transmission owners in the Northern East. In the UK we achieved a 99.9999% and 100% reliability of our electricity and gas networks respectively. In the US we achieved 98.6% system availability.

Electricity transmission – UK Gas transmission – UK Electricity transmission – US

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Electricity transmission – UK Gas transmission – UK Electricity transmission – US

National GridElectricity Distribution and Generation

� National Grid is one of the leading electricity distribution and generation companies in the Northeast US, as measured by the energy delivered, and one of the largest utilities in the US, as measured by the number of electricity distribution customers.

Electricity Distribution & Generation

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National GridGas Distribution

� National Grid operates gas distribution systems in the UK and the Northeast US. The company is responsible for the safety, development, maintenance and daily operation of gas distribution networks.

Gas Distribution – UK Gas Distribution – US

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Evolving Energy Market

Traditional Energy Market - supply driven Today’s Evolving Market - customer driven

Coal/gas fired power station

Small range of conventional technologies

Large centralised generation

$$$

Gas productionHydro-electric power

Nuclear power station

Customers focus on economic and environmental value, using a wider range of products and services

Electricity flows to users, and surplus

from distributed generation flows

back to grid

Micro windSmart metering

Micro BiomassMicro CHP

Solar water

heatingHeat

PumpsEfficient Boilers

Industrial and

commercial

Domestic

Storage+

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Energy volume drives energy

company revenue

Static infrastructure

$$$

Price and reliability are main determinants of

customer choice

Energy flows to users

Energy flows to users

CO2 emission reduction and wider energy

services drives energy company revenue

back to grid

Smart network technology rolled out

CCS plant (coal/gas)

Nuclear power station

CO2 transport and storage

Hydro-electric power

Large scale CHP and biomass

$$$

Gas production

Onshore and

offshore wind

Technology choice proliferates

Natural GasHydrogen

CO2

BiogasHeat

Industrial and

commercial

Intermittency management

Storage+

Traditional Energy Utility Model

� Socialized energy services

� Vertically integrated

� Defined service areas

�No competition

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�No competition

� Highly regulated

� Investments in traditional infrastructure

� Traditional rate plans

� Stable workforce

Evolving Market Energy Utility Model National Grid

� Socialized energy services

� Not vertically integrated

� Defined service areas

�With competition

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�With competition

� Highly regulated

� Portable workforce

� Evolving rate plans but generally traditional

� Investments are mixed – traditional and non-traditional

Our key capabilities, which enable us to be successful across the whole value chain, include:

� Operational performance – we manage our networks to exceptionally high standards

Distribution

LNG, Interconnectors and metering

Transmission

Generation

National Grid

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� Operational performance – we manage our networks to exceptionally high standards achieving excellent system availability (99.9999% system availability in UK and 98.6% system reliability in the US)

� Regulatory management – our positive relationships with our 6 UK and US regulators and government bodies are a key factor in our success

� Capital efficiency – we manage a ca. $6bn annual capital expenditure program continually driving for greater efficiencies and performance

� Green credentials – we are committed to an 80% reduction in our greenhouse gas emissions by 2050 and we continue to investigate new technologies that can reduce our own, our customers and society’s impact on climate change

� Technical know-how – we invest in and maintain the highest levels of expertise in the key technologies that impact our business

� Stakeholder management – we maintain excellent relationships with our investors, suppliers, partners and the communities in which we operate

� International track record – we have experience of acquiring and developing energy and telecomms businesses in Europe, North America, Latin America, Africa and Australia

Initiatives

� Smart Grid� Carbon Capture Sequestration� Carbon Capture Sequestration� Renewable Gas� Energy Storage� Partnering with Venture Capitalists� Photovoltaic� Engineering Our Future

To Move Smart Grid Forward National Grid has…

� Corporate commitment to address climate change

� Implemented 3% Efficiency Program

� Focused on foundational investments that evolve our system

� Established central control over investment decisions

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�Publicly Available Specification – 55 certification

� EMS/RTU installation / upgrades / replacement program

� Reclosers / Automation / Monitoring

� GIS system and integration into OMS systems

� 15 year strategic plan to guide investment and operation of the system

Smart GridWe have submitted Mass and NY Pilot proposals to de monstrate technologies

Syracuse, NY(40,000 customers)

Worcester, MA(15,000 customers)

� Includes Clean Energy Modules

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Areas identified for further pilots

� Clean Energy Modules will demonstrate how the Smart Grid can:

� Increase the penetration of all generation and storage options (including PHEVs)

� Use or exploit generation or storage

The “Clean Energy Modules”

� Photovoltaics (PV)

� PHEV/EV

� Energy Storage

� Wind Power

Clean Energy Modules

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technologies for the benefit of the overall system and for all rate payers

� We also expect to begin to understand how these modules would work together:

� Optimize the system

� Provide flexibility

� Wind Power

� Micro CHP

� Microgrid

� Holistic Homes

� Smart Grid Technology Center

Carbon Capture Sequestration

� The capture, transport and safe storage of CO2 prod uced from fossil fuel electricity generation

� We are part of the One North Sea vision for storage

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Renewable Gas Has A Strategic Fit With National Grid Strategy And Climate Change Agenda

� Renewable Gas is:

� renewable gas produced from biomass

� hydrogen produced from carbon neutral resources

� There is a need for low-carbon solutions for space heating, water heating, cooking and other direct end uses of fossil fuels

� Direct use of fuels in the United States represents about 30% of

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� Direct use of fuels in the United States represents about 30% of energy-related CO2 emissions

� Natural gas transmission and distribution assets have a major role to play in decarbonising the fuels used directly by end users

� Ultimately, National Grid believes that Renewable Gas has a role to play in GHG reduction in all sectors of the energy economy

� Supplementing natural gas with Renewable Gas will also help stretch supplies of natural gas – the fossil fuel with the lowest GHG footprint

RG Demonstration Project With United Utilities In T he UKObjective: Side by side comparison of three different uses of RG

National Grid Has A Number Of Energy Storage Activi ties Underway

Global Tech Watch

� Studying the operating characteristics and potential application of storage devices for years

� Continuous assessment of technology readiness

� 2009 Comprehensive study – Based on two low carbon economy scenarios from 2010 thru 2027

� UK – Transmission Operations

� US – Distribution Capacity Enhancements

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� US – Distribution Capacity Enhancements

• Network Operations Demonstration

� Signed a two-year agreement with Beacon Power Corp.

� Agreement enables the two companies to share performance data on Beacon Power’s ISO-NE’s frequency regulation demonstration, which is interconnected to National Grid’s distribution system

• Distribution Capacity Enhancements Demonstration

� DOE Smart Grid Demo Award – National Grid and its partners (SMUD and Premium Power) received $7m grant from DOE to install seven 500 kW energy storage systems

� DOE Smart Grid Demo Award – Participating in DTE Energy’s Community Energy Storage demonstration using A123 Li-ion battery technology

Partnering with Venture Capitalists CommunityWe bring unique expertise…

� Market expertise - in Europe and US, regulatory models, technology deployment

� Size and Scale - largest investor owned utility in the UK, one of the largest utilities in the US

� Technical Capabilities - gas and electricity, at both transmission and distribution levels

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distribution levels

� Customers - access to direct customers, range of market access points

� Cleantech - a priority area for the Board and Executive, market leading emissions reduction targets

� Technology Demonstration - ability to demonstrate and validate emerging technologies in a variety of industry applications

The Photovoltaic AC Module Self-contained 120-volt System

� Lowest-cost PV option

� More customers can buy one

� Highly Reliable

� 20-year life expected

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� Modular – Install 1,2,5 ..N

� Easily installed

� AC wiring, any electrician

� Safer to install

� Zero volts output in full sun

Engineering Our Future

� “Inspiring and Attracting Tomorrow’s Engineers”

� Launched in April 2010

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Conclusion

� National Grid believe we are on the verge of a fundamental shift in the Energy Industry driven by market evolution and emerging customer requirements to meet environmental and service aspirations

� This creates both threats and opportunities

� A review of the core Energy Industry infrastructure indicates a

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� A review of the core Energy Industry infrastructure indicates a significant upgrade and radical redesign is necessary to meet current and future needs of customers and society in general

� We must re-design and rebuild the car as we are driving it – and not crash

Contact Information

Bruce J. WalkerVice President, Asset Strategy & PolicyVice President, Asset Strategy & Policy

National Grid40 Sylvan Road

Waltham, MA 02451℡ 781-907-3360

bruce.walker2@us.ngrid.com