Ofgem has given the provisional green light to an initial £24bn investment programme to enhance energy security while enabling the transmission of more clean energy from renewable sources.
More than £15bn will be used for the continued safe operation of Great Britain’s gas transmission and distribution networks, delivering safe and secure supplies of gas to households and businesses across the UK.
An initial £8.9bn investment is being committed to Britain’s high-voltage electricity network, with a further £1.3bn “ready to go”, it said, for the “biggest expansion of the electricity grid since the 1960s”.
The draft settlement is the first step in an estimated £80bn investment programme boosting electricity network capacity. Investment in the grid will rise to around four times the current spending levels, and will allow for 80 transmission projects and all associated works across the country to be completed within five years.
This will significantly increase the grid’s capacity, through new power lines, substations and other technologies, to handle the flow of electricity from new renewable sources.
The projects will upgrade over 4400km of overhead lines and deliver 3500km of new circuits, including investments offshore, doubling the total build in the last 10 years.
It means up to 126 GW of clean power generation will be connected to the grid by 2030 alongside additional flexible storage and technologies, Ofgem said.
Over the last six months, the energy regulator has scrutinised spending proposals from the electricity transmission owners, National Gas, and the gas distribution companies, to ensure they represent the best value for billpayers.
Strict emphasis has been put on delivery targets, while pushing companies to be as efficient as possible, and where necessary, bids that we do not think are in the best interests of consumers have been turned down. This scrutiny has resulted in potential reductions of more than £8bn – equivalent to around 26% of the initial proposals put forward.
Taken all together the net cost of these investments on bills amounts to around £24 a year, or less than 40p per week, by March 2031. These costs should reduce as the benefits from the investment “fully materialise through the 2030s”, it added.
The draft determinations are now published for consultation with final decisions made by the end of 2025.
Ofgem CEO Jonathan Brearley said:
“Britain’s reliance on imported gas has left us at the mercy of volatile international gas prices which during the energy crisis would have caused bills to rise as high as £4000 for an average household without government support. Even today the price cap can move up or down by hundreds of pounds with little we can do about it.
“This record investment will deliver a homegrown energy system that is better for Britain and better for customers. It will ensure the system has greater resilience against shocks from volatile gas prices we don’t control.
“Doing nothing is not an option and will cost consumers more – this is critical national infrastructure. The sooner we build the network we need, and invest to strengthen our resilience, the lower the cost for bill payers will be in the future. ”
A response by National Grid said:
“We are pleased to see Ofgem continuing to recognise the need for significant levels of investment in networks, and the requirement for an investable framework to support its delivery.
“The Draft Determination covers Ofgem’s proposed decisions on awarding allowances for a subset of the projects included in our submission, with the remainder expected to be confirmed through in-period processes. As such, we continue to expect to invest around £60 billion over the 5 years to March 2029 across the Group.
“We will now review the detail contained within the Draft Determination to assess whether it delivers an investable overall financial package. We note that progress is needed on incentive opportunities which are both good for consumers and support investability, and we will work with Ofgem to provide further information where requested to support our capital investment plans.”
Nicola Connelly, CEO of SP Energy Networks, said:
“Our plans to invest more than £10bn into the major rewiring of Britain will unlock capacity and economic growth, as well as reducing electricity bills and network constraints. This is exactly what is needed to electrify the country, support households and businesses, and deliver the Government’s Clean Power 2030 ambitions.
“In today’s Draft Determination, we welcome that Ofgem recognises this historic investment is critical to ensuring energy security. We will now take time to analyse their initial position in more detail. Between now and December we will engage to ensure a balanced regulatory framework that incentivises this critical investment is delivered.”
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