Ofgem greenlights £28bn investment package to upgrade UK grids

Energy network companies in the UK received the green light from regulator Ofgem for multi-billion-pound funding to strengthen the stability and resilience of energy networks. 

Most of the funding, £17.8 billion ($23.8 billion), will go towards maintaining gas networks, with the remaining £10.3 billion ($13.8 billion) to strengthen the electricity transmission network, improve reliability and expand capacity to support electrification.

The energy regulator says the financing commitment will rise to an estimated £90 billion ($120.3 billion) by 2031 across both gas and electricity networks.

Ofgem’s approved investment will fund 80 transmission projects and associated works nationwide over the next five years. This will significantly increase grid capacity through new power lines, substations and other technologies.

Commenting in a release was Jonathan Brearley, Ofgem's CEO:

“The funding announced today will keep Britain’s energy network among the safest, most secure and resilient in the world. The investment will support the transition to new forms of energy and support new industrial customers to help drive economic growth and insulate us from volatile gas prices.”

With the financing, Brearly said that Ofgem will hold network companies, recipients of the financing, “accountable for delivering on time and on budget, and we make no apologies for the efficiency challenge we're setting as the industry scales up investment. 

“We've built strong consumer protections into these contracts, meaning funds will only be released when needed and clawed back if not used.”

Utility reactions

Reacting to the package, energy company SSE welcomed its improvements to baseline total expenditure. However, they add that a detailed assessment is yet required to determine the overall investability of the package.

With more material to be released by Ofgem over the next few days, SSE plc's Transmission business will review and assess the price control package over the coming weeks.

Said Martin Pibworth, Chief Executive of SSE:

“This price control comes at a pivotal moment for Britain’s energy system. 

“In front of us is a once-in-a-generation opportunity to upgrade the grid, unlocking the potential that exists within our energy system, supply chains and economy.”

With the package, National Grid said they welcome Ofgem’s recognition of the need for significant investment into the electricity transmission sector, although they too will review the details to determine whether it delivers an investable and workable framework.

Consumers’ expense 

To fund the package, household consumers in the UK will see their bills increase by £108 ($144.25) by 2031.

Ofgem’s hope is the investment will pay off, with electricity grid expansion alone expected to reduce bills by £50 ($66.80) by 2031, thanks to lower reliance on imported gas and the halting of constraint costs. 

Commenting on the rise and the package was Greg Jackson, Founder and CEO of Octopus Energy: “Of course we need new infrastructure but these plans risk pushing bills ever higher. 

“Every bit of these plans needs examining carefully and serious challenge to see what can be saved. Cheaper batteries and more flexibility could cut bills by billions, as could modern grid technologies and more competition.”

Said Jess Ralston, Head of Energy at the Energy and Climate Intelligence Unit (ECIU):

“Upgrading our electricity grid after decades of under-investment, like many would say we've seen in schools and hospitals, is important for shielding households from any future energy crises. 

“Ensuring more British wind and solar can come online will boost the UK’s energy independence and reduce the risk of bill shocks by making the UK less dependent on gas from abroad. North Sea gas output will inevitably continue to decline so there is a burning platform to upgrade.”

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Great British Energy’s 5-year plan

Simultaneously with the package announcement, Great British Energy published its first strategic plan, outlining how it will attempt to connect more renewable power and strengthen the country's grid.

The plan aims to integrate at least 15GW of clean energy generation and storage assets, mobilise £15 billion ($20 billion) of private finance and support over 1,000 local and community energy projects, expanding public participation and local control in the energy system.

Under its plan, the state-owned company will operate as a developer and equity investor; returns generated from publicly owned assets will be reinvested into new capacity, new jobs and new opportunities.

Said Great British Energy’s CEO, Dan McGrail:   

“We are proud to be putting public ownership to work, unlocking investment, powering communities, creating jobs, and building an energy system that delivers for the UK.  

“This Strategic Plan marks a major milestone in our mission to accelerate clean energy and the industries that support it.”  

Added Energy Secretary, Ed Miliband: “We set up Great British Energy to be a national champion that allows us to reap the benefits of Britain’s natural resources.   

“This plan shows what a publicly-owned energy company will deliver: an abundance of clean, homegrown energy for British people and thousands of good jobs across the country.”