Ofgem proposes £25bn to transform Britain’s energy networks

Ofgem has proposed a five-year £25bn investment programme to transform Britain’s energy networks, deliver emissions free green energy, world class service and reliability.

Its RIIO-2 proposals, published on 9 July, would result in an expected £20 fall in network chargers on bills per household, a year, at the start of the price control period. Along with £25bn to maintain and operate gas distribution, gas and electricity transmission networks, Ofgem has called on network companies to come forward with additional ideas on bringing forward investment plans in the current price control.

It is further proposing to unlock significant additional funding to drive green energy and infrastructure upgrades companies can access over the next five years. This could see a further £10bn or more net zero investment supported through price controls, with Ofgem only giving the green light to measures that deliver decarbonisation at lowest cost. The proposals also include a £630mn Strategic Innovation Fund to drive research and development into key green energy projects, including expanding the range of possibilities for decarbonising heat infrastructure, such as hydrogen.

The plans would almost halve network companies’ allowed rate of return, resulting in a greater amount of consumer money going towards network improvements. Ofgem outlined this as £3.3bn in savings over the next five years for the gas and transmission sectors alone. It is planning a further £8bn cut from company spending plans through setting stretching efficiency targets and disallowing costs companies have not justified as delivering value for money for consumers.

Ofgem