Ofgem Clears $33.04 Billion Investment Programme in Energy Sector

The UK’s Office of Gas and Electricity Markets (Ofgem) on Tuesday gave the provisional green light to an initial $33.04 billion investment programme to enhance the country’s energy security while enabling the transmission of more clean energy from renewable sources.  

Over $20.65 billion will ensure the continued safe operation of Great Britain’s gas transmission and distribution networks, making sure they deliver safe and secure supplies of gas to households and businesses across the UK. 

An initial $12.25 billion investment is being committed to Britain’s high-voltage electricity network, with a further $1.79 billion ready to go – to power the biggest expansion of the electricity grid since the 1960s.

The draft settlement is the first step in an estimated $110.13 billion investment programme boosting electricity network capacity, protecting UK households from the volatile international gas markets that caused the massive fluctuations in energy bills in recent years.  

The investment in the UK grid, which will rise to around four times the current spending levels, will allow for 80 transmission projects and all associated works right 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,” Ofgem said.    

These projects, which are also vital for driving growth, will upgrade over 4400 km of overhead lines and deliver 3500 km of new circuits, including investments offshore, doubling the total build in the last 10 years.

In other words, up to 126 GW of clean power generation will be connected to the grid by 2030 alongside additional flexible storage and technologies, enough to power millions of households with clean, stable and secure energy.    

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.     

Delivering Domestic Energy System

Ofgem CEO Jonathan Brearley said that Britain’s reliance on imported gas has left the country at the mercy of volatile international gas prices which during the energy crisis would have caused bills to rise as high as $5506.48 for an average household without government support.

“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,” he said. 

According to him, these 80 projects are a long-term insurance policy against threats to Britain’s energy security and the instability of prices. By bringing online dozens of homegrown, renewable generation sites and modernising our energy system to the one we will need in the future we can boost growth and give ourselves more control over prices too.  

Doing nothing is not an option and will cost consumers more – this is critical national infrastructure. The sooner we build the network needed, and invest to strengthen the power sector’s resilience, the lower the cost for bill payers will be in the future, he pointed out. 

This critical investment covering upgrade and expansion of the electricity grid, maintenance and also gas depreciation in its entirety is estimated to increase network charges on bills by $143.17 by 2031. This includes $41.30 for the gas networks and $101.87 for the electricity grid. 

Around half of this investment, including $41.30 on gas networks, is needed for the gas and electricity grids to maintain safety, resilience, and reliability. The remainder, around $71.58, will be used to expand the capacity of the electricity grid to deal with the rising demands of a more electrified energy system, as the consumers move away from gas, he added.