Investment plan

Ofgem unveils £20bn green investment plan for local power grids

Britain’s energy regulator has unveiled plans to invest £20.9 billion in upgrading Britain’s regional electricity networks over the next five years, with the aim of increasing network capacity, improving resilience and prepare the grid for a growing influx of green energy over the next decade. and beyond.

Ofgem said its five-year plan, which covers the period 2023-2028, would help support the transition of local energy networks to a low-carbon energy system, while helping to make the network more reliable, cheaper to operate and less dependent on fossil fuels. , and more agile and innovative.

He also stressed that the investment would not impose any additional cost on consumers, with expected efficiency savings and a reduction in investor returns being used to ensure that the investment plan does not result in higher bills.

The regulator said the changes would help reduce reliance on “expensive and unreliable fossil fuel imports which leave UK homes and businesses at the mercy of volatile global gas prices and the kind of geopolitical threats we’ve seen this year.”

The vision is part of the regulator’s draft plans for the next period of electricity distribution price controls – known as RIIO-ED2 – which sets out the revenue each of the 14 UK distribution network operators can earn charges they impose on consumers. energy bills.

At present, the average payer pays around £100 a year to cover the costs of operating, maintaining and reinforcing local electricity networks, and amid the still-worsening cost of living crisis Exacerbated by Russia’s invasion of Ukraine, Ofgem insisted the new goal was to ensure value for money for consumers.

Jonathan Brearley, chief executive of Ofgem, said the regulator’s aim was to attract a significant increase in the investment needed for a more resilient energy network “and to achieve the government’s net zero ambition at the least cost to the consumer”.

“These are challenging times, and this is the path to moving away from reliance on expensive and polluting imported fossil fuels and towards a local energy system, which harnesses the best of modern technology to level demand and reduce costs for consumers,” he said. said. “We are committed to getting the best possible deal for consumers and the proposals we have released today will mean that substantial additional investment can be made to deliver net zero without putting additional pressure on bills.

“We are confident that the five-year vision we have set will help build the world-class energy infrastructure needed to connect consumers to reliable, cleaner energy at an affordable price.”

The proposed package amounts to £20.9bn and includes £2.7bn of seed funding to increase network capacity, as well as more flexible funding arrangements to support investments in the evolution network demand over time, according to Ofgem.

The regulator highlighted growing innovation in the energy sector that it said it wanted to support through the plan, such as smart appliances that can draw electricity from the grid when demand on the grid is low or that the production of renewable energies is particularly high.

Energy companies have widely welcomed the draft plan, which comes as the sector aims to deliver a fully carbon-free electricity grid by 2035, in line with government ambitions.

Good Energy CEO Nigel Pocklington said it was “good to see Ofgem recognizing the scale of the challenge” of decarbonising the UK power grid by the mid-2030s, including through “an initial investment in network readiness for clean technologies”.

“We know people are eager for lower carbon options, better options like electric vehicles and heat pumps, and how quickly renewables can be deployed,” he said. . “It’s the technology that will lower bills in the long run. We need the network infrastructure to keep pace, so everyone can benefit.”

However, some within the industry have argued that changes to the draft plan may still be needed to ensure sufficient investment is mobilized in necessary grid upgrades and emerging smart grid technologies.

“Final determinations will require more work to give us confidence that RIIO-ED2 will be compatible with customer expectations of an energy system that enables the transition to net zero,” said David Smith, CEO of the Energy Networks Association (ENA). “We will be working with Ofgem over the coming months to meet this challenge.

“As record numbers of electric vehicles, renewables and heat pumps are introduced into our energy system, the ED2 price control period is crucial, recognizing the scale of the transformation and the leading role that networks will play to enable decarbonization In addition to supporting a growing number of low-carbon technology through flexibility and innovation, networks need both certainty and agility investment to meet the scale of the challenge when customers and communities need it.”

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