Ofgem has unveiled proposals for a five-year investment programme of around £25 bn to transform Britain’s energy networks to deliver emissions-free green energy for GB along with world-class service and reliability. Investment in the networks that transport energy round GB is likely to rise, to ensure they can deliver clean energy and meet Government targets for a net zero emissions GB. This investment will also help generate green growth and employment.
Given the scale of green investment likely to be needed in future, Ofgem is keeping costs as low as possible for consumers by proposing the lowest ever rate of return on capital for network companies, and pushing companies to be much more efficient in how they run themselves.
Jonathan Brearley, Ofgem’s chief executive, said: “Ofgem is working to deliver a greener, fairer energy system for consumers. This is why we are striking a fair deal for consumers, cutting returns to the network companies to an unprecedented low level while making room for around £25 billion of investment needed to drive a clean, green and resilient recovery.
“Now more than ever, we need to make sure that every pound on consumers’ bills goes further. Less of your money will go towards company shareholders, and more into improving the network to power the economy and to fight climate change.
“Ofgem’s stable and predictable regulatory regime will continue to attract the investment Britain needs to go further and faster on decarbonisation.”
In order to further support the green recovery Ofgem has also asked network companies to come forward with additional ideas on bringing forward investment plans in the current price control. Under the proposals Ofgem is allocating £25bn upfront expenditure to maintain and operate GB’s gas distribution, and gas and electricity transmission networks as well as support the growth of green energy.
Ofgem is also proposing to unlock significant additional funding to drive green emissions-free energy and infrastructure upgrades, that companies can access over the next five years as needed. This could see potentially another £10bn or more of net zero investment supported through the price controls, and more if needed. Ofgem will scrutinise every investment and only give the green light to measures that deliver decarbonisation at the lowest cost to consumers.
On innovation, a new Strategic Innovation Fund, together with funding to individual companies for network innovations, will provide £630m to drive research and development into crucial green energy projects, including to help expand the range of possibilities for decarbonising the heat infrastructure, such as hydrogen, with the potential to fund more if needed.