Energy Network Modernization
The energy regulator has confirmed plans for a major modernization of the UK’s energy networks, which would increase customer bills by £108 by 2031. Ofgem said the £28 billion investment over the next five years would strengthen resilience in the transition to a renewable energy future and that much of the bill would be offset by efficiency improvements.
Investment and Savings
The regulator pointed to an estimated saving for households of around £80 from the planned investment in gas and electricity infrastructure, leaving a net additional contribution of £28. Ofgem said the £28bn sum was part of an estimated £90bn to be invested in energy networks by 2031, with "adaptive" financing arrangements helping to protect customers from volatility in the market.
Funding Allocation
The bulk of the funding announced will go toward maintaining gas networks, which will remain an important source of energy as green power capacity continues to expand. “Investing now to maintain world-class resilience and expand network capacity is the most cost-effective way to harness clean electricity, support economic growth and protect the country from gas price shocks like the one in 2022,” Ofgem said.
Energy Price Drivers
Then Russia’s invasion of Ukraine and Europe’s refusal to buy Russian gas in response caused energy bills to reach unprecedented levels and triggered a broader cost of living crisis as higher energy costs were passed on throughout the economy. Ofgem made its announcement as cost state energy policies and other modernizations are the largest contributors to increasing household bills.
Consumer Protections
Ofgem chief said: "The funding announced today will ensure the UK’s energy network is one of the safest and most resilient in the world. The investment will support the transition to new forms of energy and support new industrial customers to boost economic growth and protect us from volatile gas prices."
"But this is not an investment at any price. Every pound must deliver value for consumers. Ofgem will hold network companies accountable for delivering on time and on budget and we make no apology for the efficiency challenge we pose as the industry increases investment."
Government Response
A Department for Energy Security and Net Zero spokesperson said: “This Government is taking action to reduce energy bills for families, with the Budget deducting an average of £150 in costs from bills in April and extending our £150 Warm Home rebate to over six million families.”
"Modernizing our gas and electricity networks after years of underinvestment is essential to keeping the lights on and ensuring energy security for our country. Without these plans, first put in place under the previous administration, costs would skyrocket and our security would be at risk.”
“The only way to finally lower bills and get off the fossil fuel roller coaster is through this administration’s mission to deliver clean, homegrown products that we control.”
