Business Carbon Footprint 2016/17

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2 Contents 1. Introduction... 3 Scope... 4 Methodology Individual elements... 8 Operational Transport (38%)... 9 Building and substation energy use (36%) Temporary generation (16%) Business Transport (6%) Fugitive Emissions (4%) Distribution Losses UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 2 of 14

3 1. Introduction We are the UK s largest, and lowest cost, electricity Distribution Network Operator (DNO). We operate three networks serving more than a quarter of the UK population and providing a safe, secure and sustainable electricity supply to 8.2 million homes and businesses across London, the East and South East of England. Operating and maintaining the electricity network for these areas enables us to play an important role in the electrification of the country s public and private modes of transport. How electricity is generated, distributed and used is changing. To facilitate this change we are transitioning from being a DNO to being a Distribution System Operator (DSO), creating a more flexible and responsive network that will support Electric Vehicles (EVs), heat pumps, battery storage and other low carbon technologies of today and of the future. Figure 1 Our Business Vision It is part of our vision for UK Power Networks to be a respected corporate citizen. As a key player in the power industry, we take our responsibility towards protecting the environment seriously. We address the environment on a number of fronts. Firstly, we are leading the drive towards a low carbon economy. Innovations in this field will contribute to a reduction in everyone s carbon footprint in our area. Secondly, we take the opportunity to reduce our own Business Carbon Footprint (BCF) whenever we can. Business Carbon Footprint In our RIIO-ED1 Business Plan we set a target to reduce our business carbon footprint (BCF) by 2% in each year of the RIIO-ED1 price control period. Since 2015 we are pleased to report a reduction of almost 11%, placing us significantly ahead of target. Since 2015 we have reduced our carbon emissions by just under 11%. UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 3 of 14

4 Figure 2 Business Carbon Footprint reduction by region EPN -5% SPN -21% Overall -11% LPN -8% We constantly look for ways to reduce our BCF and monitor our performance on a monthly basis. This report describes our BCF reporting process, the elements of our BCF, how these are measured, and how we track our carbon emissions throughout the year. UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 4 of 14

5 Scope The following commentary details the processes used to calculate the BCF for UK Power Networks specific to our business regulated by Ofgem. This is composed of our three licensed distribution network operators (DNOs); Eastern Power Networks plc (EPN), London Power Networks plc (LPN) and South Eastern Power Networks plc (SPN). The emissions of our affiliate commercial company UK Power Networks Services, our unregulated business, are not covered here. All data in this commentary indicated by a yellow box, as shown in the example below, corresponds with the completed summary tables returned to Ofgem in July Example: Where data is collected centrally this is apportioned between UK Power Networks three DNOs based on headcount as of March The Greenhouse Gas (GHG) Protocol 1 categorises direct and indirect emissions into three scopes. These apply to UK Power Networks as follows. Scope 1: Direct GHG emissions from sources owned or controlled by UK Power Networks. Scope 2: Indirect GHG emissions from consumption of purchased electricity, heat or steam. Scope 3: Other indirect emissions, such as the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by UK Power Networks, electricity-related activities (e.g. T&D losses) not covered in Scope 2 such as outsourced activities This Business Carbon Footprint report covers the emissions for these three scopes from the regulated business for the reporting year April 2016 to March In all calculations, the Government-issued carbon conversion factors in effect in March 2017 have been used. We present our carbon footprint both including and excluding distribution losses. Distribution losses constitute more than 97% of our total BCF and are the focus of a separate strategy. Focusing on our BCF excluding losses highlights the potential for sustainability improvements in other areas. Excluding distribution losses, the largest elements of our BCF are operational transport (38%), and building and substation energy usage (36%) followed by temporary generation (16%), business transport (6%) and fugitive emissions (4%). These elements are illustrated in Figure 4. Table 1 (overleaf) shows our BCF excluding distribution losses for the regulatory years (our baseline measurement year as set by Ofgem) and The Greenhouse Gas Protocol establishes a comprehensive, global, standardized framework for measuring and managing greenhouse gas emissions UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 5 of 14

6 Table 1 Our and BCF excluding losses DNO % change EPN 32, , % LPN 19, , % SPN 25, , % Total 77, , % Methodology To check progress against our RIIO-ED1 target we prepare monthly BCF reports using data received from internal and external sources. Any anomalies in the data are closely examined to establish the root cause. Corrective and preventative actions are then implemented where necessary. Monthly reports are received from various sources within UK Power Networks. These cover: Electricity and gas meter readings Fleet fuel usage Business mileage and transport expense claims Generator fuel usage Sulphur hexafluoride (SF 6 ) top-ups Headcount We also receive monthly booking reports from our external travel provider and require our contractors to report on any work that is subcontracted or accumulated as a direct result of works undertaken on our behalf. Our BCF reporting process takes into account carbon emissions from operational contractors who are involved in developing and operating our electricity networks and who have a significant spend threshold per annum (generally 250k or above). In this report the values representing UK Power Networks and contractors emissions are shown both separately and as a combined figure. For elements such as the purchase of fuel for temporary generation, SF 6 top-ups, substation energy use and some of our building energy, data is apportioned directly to each of our three DNOs wherever possible. Some data is captured centrally and where this is the case we apportion the data between the DNOs on a headcount basis. This approach is favoured over geographical apportionment as the LPN region only accounts for around 2% of the total land area, which would result in an unrealistically small apportionment. A major factor in the smaller comparative reduction of EPN compared to SPN in Table 1 is a result of this apportionment. Contracts for tree trimming and streetworks were brought in-house in EPN and this included many of the staff working on the contracts coming in-house under TUPE regulations. This means that since 2014/15 EPN s apportionment has increased by 6.5% and SPN s apportionment reduced by 6%. UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 6 of 14

7 For the last three years our entire BCF reporting process has been audited by UK Power Networks Internal Assurance team. Elements have also been examined annually by the external auditors DNV-GL as part of UK Power Networks ISO accreditation. UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 7 of 14

8 Business Carbon Footprint 2. Individual elements Figure 3 and Figure 4 show the relative proportions of the individual elements of UK Power Networks BCF for the and regulatory years. Figure BCF breakdown excluding distribution losses Fugitive emissions 3% Temporary Generation 15% BCF Building and Substation Energy Usage 38% Business Transport 6% Operational Transport 38% Figure BCF breakdown excluding distribution losses Temporary Generation 16% Fugitive emissions 4% BCF Building and Substation Energy Usage 36% Business Transport 6% Operational Transport 38% UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 8 of 14

9 Though our overall BCF is reducing, its relative proportions are broadly similar year on year, with our operational fleet and building and substation energy usage remaining the largest elements. The most significant change has been the proportional decrease of 2% in our building and substation energy usage. A contributing factor is the alteration in the fuel mix making up the UK s electricity supply. The closure of coal fired power stations and increasing amounts of renewable energy connected to the network have led to a marked decrease in the carbon factor for UK electricity. Operational Transport (38%) The Operational Transport element of our BCF represents the fuel used by our fleet of vans, trucks and specialist vehicles which work directly on our electricity networks. We also report on the fuel used by our contractors operational vehicles when working on our behalf. Fuel purchased for UK Power Networks fleet vehicles is captured using fuel cards. Contractor transport data is obtained from contractor fuel cards submitted via a manual reporting process. In , 99.36% of fuel purchased was diesel and hence the diesel factor has been used for conversion purposes. A small quantity of diesel for temporary generation is also purchased using fuel cards, but this is recorded separately and is reported as part of our Temporary Generation carbon footprint. The methodology used for calculating operational transport is consistent each year to obtain comparable data. Fuel usage is not recorded separately for each DNO. The total has been apportioned based on the number of direct operational staff per area. This year s operational staff split was 43.5% in EPN, 29.7% in LPN and 26.7% in SPN. This compares with 37.0% EPN, 30.3% LPN and 32.7% in SPN in 2014/15. The significant increase in EPN s apportionment is a result of bringing both the tree trimming and streetworks contracts in-house. A 7million major refurbishment of our fleet has taken place in recent years replacing many older vehicles with safer, more reliable fuel-efficient models. Our contractor emissions have reduced as functions like tree trimming have been brought in-house. Table 2 shows the levels of tco 2 e emitted by UK Power Networks operational fleet and contractors when working on our networks. Table 2 Levels of tco 2e emitted by UK Power Networks operational fleet and contractors working on our networks DNO Direct % of % change operational staff staff total our fleet contractor combined EPN 1,167 43% 11, , , , % LPN % 9, , , , % SPN % 10, , , , % Total 2, % 30, , , , % UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 9 of 14

10 Building and substation energy use (36%) Data on building and substation energy usage is collated from the electricity and gas bills received for each of our sites. Data is measured in kwh then converted into tco 2 e. Geographical location determines to which DNO buildings are assigned. However, where cross-dno shared services, such as IT, HR and Finance, are housed in major offices these are designated as shared buildings and overall UK Power Networks headcount is used as a factor to determine energy used per DNO. These are Bury St Edmunds, Crawley, Ipswich and Maidstone; Newington House, Nelson Street and Potters Bar in London and our two training centres at Risby and Sundridge. The split used this year is EPN 40%, LPN 30%, SPN 30%. This headcount split is only a slight change on that used for the 2014/15 baseline carbon footprint of EPN 41%, LPN 29%, SPN 30%. However, two major regional offices, Bury St Edmunds in EPN and Maidstone in SPN have been designated shared offices since the baseline year 2014/15. This means that LPN takes a share of their energy use while it didn t before resulting in the increase for LPN in table 3. Carbon savings have been a result of consolidation of staff into fewer building and energy saving initiatives such as the introduction of LED lighting in many offices. A detailed project to analyse electricity usage in our substations is the basis of the reporting and billing of our unmetered supply. Substations were separated into Grid, Primary and Secondary substations and comprehensive analysis of the energy usage of each type undertaken. Typical energy usage on aspects like heating, lighting and security were determined and then applied across the business based on the numbers of unmetered substations of that type in operation. Annual consumption of energy used in unmetered substations has been assessed based on the number and type of plant installed in each DNO. This method has been consistent with that used in previous years. The fuel mix which makes up UK electricity has changed in recent years with an increase in renewables and the shutdown of coal fired power stations. This resulted in Defra reducing the carbon factor per kwh of electricity in the UK by 6.8% from 2014 to 2015 and by a further 10.8% from 2015 to This has had a major impact on all of the elements of our carbon footprint made up of electricity use. Table 3 shows the levels of tco 2 e emitted from our offices, depots and substations. Table 3 Electricity usage at UK Power Networks sites DNO % change total total EPN 13, , % LPN 6, , % SPN 6, , % Total 27, , % Temporary generation (16%) UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 10 of 14

11 The Temporary Generation element of our BCF covers emissions from plant and equipment, such as mobile generators used during fault repairs and planned work on our networks. Data for such emissions is captured from three different sources: From external contractors reporting the monthly fuel usage of standby diesel generators: invoices for diesel fuel are used to collate the monthly fuel usage by DNO. Though provided by external contractors on an ad hoc basis, these are classed as Scope 1 rather than Scope 3 emissions, as they are in direct use on our networks From fuel cards capturing the amount of fuel used by company owned plant and equipment From invoices submitted by the tanker company that fills the bowsers at several of the sites used to fuel our own generators As the source data is captured by region, no headcount conversion needs to be applied. Table 4 shows the levels of tco 2 e emitted from temporary generators and plant and equipment used on our networks. Table 4 tco 2e emitted from temporary generators and plant and equipment used on our networks DNO total % change UK Power Networks contractor combined EPN 4, , , % LPN 1, % SPN 6, , , % Total 12, , , % UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 11 of 14

12 Business Transport (6%) The Business Transport element is concerned primarily with employees business mileage and public transport when attending meetings, which constitute indirect operational emissions. Some of the emissions included will be directly related to our operational work, such as visits to projects, due to the data being combined. Any source data available as costs only, has been converted into kilometres or litres using best available methodologies before applying conversion factors. Transport records for shared services relating to the unregulated business is not recorded separately from the regulated business so all data is included within the calculations. We obtain data from the following sources: SAP, our financial management system, enables us to determine business mileage and travel claimed through staff expenses Our external travel provider Corporate credit cards Fuel cards (fuel card holders private mileage is declared in miles and deducted from mileage expense claims in our SAP system) Business travel data is recorded by mode of transport used (e.g. air, rail and road). It is recorded centrally and apportioned based on the number of indirect staff employed in each region. In this was LPN 30%, EPN 38% and SPN 33% compared to LPN 23%, EPN 50% and SPN 27% in 2014/15. Business kilometres are based on the actual kilometres claimed. Fuel card usage is based on the actual litres used. For vehicles that are owned by UK Power Networks or purchased through our business needs self-purchase scheme, we use the actual CO 2 rating to calculate each vehicle s contribution to our BCF which provides us with accurate data. Where employees claim business mileage for privately owned vehicles, the government s unknown vehicle average conversion factor is used. An increasing number of our employees are issued with fuel cards and this provides a more accurate measure from a BCF perspective. Fuel data can be captured in terms of the quantity of fuel used, eliminating the wide variations between cars and drivers in actual carbon used per kilometre. We continue to encourage our staff to use teleconferencing facilities as an alternative to business travel. As Table 5 demonstrates, our overall business mileage figures are 8% less than they were in 2014/15. Table 5 Business mileage summary showing the levels of tco 2e emitted by UK Power Networks staff and contractors when travelling on company business DNO Indirect % of % change staff staff total UK Power Networks contractor combined EPN 1,108 38% 1, , , % LPN % 1, , , % SPN % 1, , , % Total 2, % 4, , , % UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 12 of 14

13 Fugitive Emissions (4%) Sulphur hexafluoride (SF 6 ) is an electrical insulating gas commonly found in modern electrical switchgear. This gas can leak following faults or from old equipment. As the carbon factor for a kg of SF 6 is equivalent to 22,800 kgs of CO 2 a small number of leaks can make a big difference to our carbon footprint. This was the case in EPN in and we currently have five leak rectification projects being progressed. We are launching a new innovation project focused solely on improving our end-to-end processes relating to SF 6. This is scheduled to start in early 2018 and its aim is to highlight any areas for improvement in our SF 6 process, examining feasible solutions and implementing those solutions. We keep abreast of all innovations related to SF 6 as an insulation medium, including the exploration of SF 6 alternatives. From a BCF perspective, we measure and record the quantities of SF 6 lost as fugitive emissions. Table 6 shows the levels of SF 6 emissions reported by our three DNOs in and Table 6 Levels of tco 2e emitted from leakage of SF 6 from switchgear DNO total total % change EPN 1, , % LPN % SPN % Total 2, , % Consistent with the approach used for previous years BCF submissions, we have not included emissions from air conditioning in the values reported above. UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 13 of 14

14 Distribution Losses Distribution network losses - the difference between the electrical energy entering the network and the energy delivered to the end customer - are a consequence of transferring electricity across the distribution system. There are a variety of technical losses but the two principal types are fixed and variable. As energy passes through our network a small proportion of energy is lost as heat during transportation. This is known as a variable loss as it varies with the amount of energy distributed. We are installing larger cross-section conductors to reduce resistance and hence variable losses. Fixed losses are independent of the energy being transferred across the network and generally relate to losses associated with the energy required to energise transformers. A significant number of transformers are installed each year which have lower losses than the units they replace. The level of technical losses within a system will depend on a number of factors, but for a typical distribution network around 30 per cent of technical losses will be due to fixed losses and around 70 per cent will be due to variable losses although there will be regional variations in this ratio. Distribution networks also suffer loss of energy through non-technical losses. These result from the under-recording or non-recording of electricity consumption for example, when a customer extracts energy from the network illegally. Non-technical losses represent a much smaller value than those associated with technical losses. Overall losses performance is presented in Table 7 and our overall Business Carbon Footprint including losses is given in Table 8 below. The figures are correct at the time of submission but may be subject to further updates given the standard reconciliation cycle in the settlements process. Table 7 Levels of tco 2e emitted from direct losses as the electricity travels through our networks DNO total total % change EPN 1,178, ,016, % LPN 913, , % SPN 663, , % Total 2,755, ,337, % Table 8 Our overall BCF including distribution losses in tco 2e DNO % change EPN 1,210, ,047, % LPN 933, , % SPN 688, , % Total 2,833, ,406, % UK Power Networks (Operations) Limited. Registered in England and Wales. Registered No Registered Office: Newington House, 237 Southwark Bridge Road, London, SE1 6NP Page 14 of 14