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Britain’s energy regulator has provisionally approved £24bn of investment in the country’s gas and electricity networks, in a move that risks pushing up already elevated household energy bills.
The regulator plans to sign off on £8.9bn of investment in Britain’s high voltage electricity transmission network and more than £15bn investment in gas networks between 2026 and 2031, as part of plans to bolster the UK’s energy security.
It marks the first stage of a potential £80bn investment in electricity networks over the five-year period. Ofgem expects the investments will lead to an estimated £104 annual increase to charges on household bills.
The investments would fund the “biggest expansion of the electricity grid since the 1960s”, said Ofgem, as pylons and cables are rolled out to help cater for growing levels of wind and solar power, as part of Britain’s clean power push.
The network investments would result in lower costs elsewhere on the system, Ofgem said, estimating the net increase to charges on household bills would be around £24 per year.
The government wants to decarbonise the electricity system by 2030, requiring nearly 1,000km of new onshore cables and 4,500km of offshore cables.
Jonathan Brearley, chief executive of Ofgem, said the investment would “deliver a homegrown energy system that is better for Britain and better for customers”.
He added: “It will ensure the system has greater resilience against shocks from volatile gas prices we don’t control.”
However, the increase in network charges is likely to attract scrutiny at a time of concern about elevated energy bills.
The price cap, which governs typical household bills, started to rise significantly in late 2021 as gas prices soared. It currently stands at £1,720 per year, several hundred pounds higher than before the energy crisis began.
Network charges currently account for about £333 of an annual household bill. On Tuesday, Ofgem said the potential total investment in electricity transmission and gas networks would add £104 to network charges per year from 2031, of which £74 is for the electricity grid and £30 for the gas networks.
Ofgem has yet to approve separate spending plans for the lower voltage electricity networks for 2028-33.
Network owners will now review Ofgem’s position on their spending plans ahead of a final determination in December.
National Grid, which owns the electricity transmission network in England and Wales, said on Tuesday that it was “pleased to see Ofgem continuing to recognise the need for significant levels of investment in networks”.
“We will now review the detail contained within the draft determination to assess whether it delivers an investable overall financial package.”
However, SSEN Transmission, which owns parts of the transmission grid in Scotland, said Ofgem’s draft approval did “not go far enough to deliver the investible, financeable and ambitious framework required” to unlock the “unprecedented” levels of investment needed to deliver lower and more stable bills.
