Ofgem approves initial £24 billion to operate and maintain critical gas networks and upgrade Britain's electricity supergrid
Press release
- Publication date
- Industry sector
- Distribution Network
- Transmission Network
Ofgem has today (1 July) given the provisional green light to an initial £24bn investment programme to enhance energy security while enabling the transmission of more clean energy from renewable sources.
Over £15bn 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 £8.9bn investment is being committed to Britain’s high-voltage electricity network, with a further £1.3bn 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 £80bn 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 our 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.
These projects, which are also vital for driving growth, will upgrade over 4400km of overhead lines and deliver 3500km of new circuits, including investments offshore, doubling the total build in the last 10 years. It means 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.
Ofgem CEO Jonathan Brearley said:
“Britain’s reliance on imported gas has left us at the mercy of volatile international gas prices which during the energy crisis would have caused bills to rise as high as £4000 for an average household without government support. Even today the price cap can move up or down by hundreds of pounds with little we can do about it.
“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.
“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 we need, and invest to strengthen our resilience, the lower the cost for bill payers will be in the future.
“However, this can’t be done at any price, which is why we have built in cost controls and negotiated a fair deal for both investors and consumers. And we won’t hesitate to intervene if network companies don’t deliver on time and on budget.”
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 £104 by 2031. This includes £30 for the gas networks and £74 for the electricity grid.
Around half of this investment, including £30 on gas networks, is needed for the gas and electricity grids to maintain safety, resilience, and reliability.
The remainder, around £52, will be used to expand the capacity of the electricity grid to deal with the rising demands of a more electrified energy system, as we move away from gas.
This investment (£52) alone is expected to lead to around £80 of savings for consumers by 2031 compared to not investing by reducing constraint costs (money paid to wind farms to switch off because the grid is unable to transmit their power output) and making better use of our clean renewable energy so we are not having to pay for expensive gas plants to serve demand. So bills are expected to be around £30 lower than they would have been had this investment in upgrading and expanding the electricity network not been made.
Taken all together the net cost of these investments on bills amounts to around £24 a year, or less than 40p per week, by March 2031, although this does not take into account the overall benefits of reaching clean power that can reduce bills.
The £30 increase in gas network charges on bills by 2031 would be necessary in all scenarios in order to maintain safety, resilience, and reliability in our gas networks.
These costs should also reduce even further as the benefits from the investment fully materialise through the 2030s.
The draft determinations are now published for consultation with final decisions made by the end of 2025.
Notes to editors
Ofgem has approved upfront baseline spending of £24.2bn over the RIIO-3 period between 2026/27 and 2030/31.
£8.9bn in initial funding has been approved for the electricity transmission sector to upgrade grid, with immediate access to a further £1.3bn of ‘use it or lose it’ investment. This is the first approval stage in a wider £80bn investment programme expected over the 5-year period.
This includes £4.2bn for National Grid (NGET), £3.1bn (SSEN) and £1.6bn for Scottish Power (SPT). This comes shortly after Ofgem’s confirmation of the Advanced Procurement Mechanism (APM) that will allow these companies access to ~£4bn of accelerated funding to help unblock supply chains to accelerate construction, cut costs and attract investment.
A further £2.5bn has been proposed to operate and maintain the national gas transmission system, with £12.8bn allocated for the regional gas distribution networks across the country to maintain safe and secure supplies.
The national system operator NESO estimates the 80 projects will cut constraint costs threefold and leave only 5% power from unabated gas use by 2030. Ofgem’s decision today means any project not already approved or in delivery will now progress their next to their next stage of development.
Ofgem has completed a robust assessment of all spending proposals, applying tough cost controls and demanding higher value-for-money where proposed spending is not justified and inefficient, subject to further consultation. Tougher delivery targets have also been set on key service areas.
Ofgem has set a provisional cost of equity allowance for private investment of 6% (at 60% gearing) over the five-year period, down from 6.5 to 6.9%, which companies argued for in their business plans. This strikes the right balance between unlocking investment, cutting barriers to 2030-delivery and fair deal for consumers.