Ofgem have confirmed a five-year investment programme. The scheme has been designed for the electrical distribution network operators to deliver cheaper, more dependable local grids at no additional cost to customers.

A crucial element of the strategy will be that network investments assist the transition from significant reliance on imported fossil fuels to using more domestic energy sources.

The possibility of renewable energy, such as wind and solar power, necessitates changes in how energy is used and stored to realize its benefits.

The price control established by Ofgem will permit the required scale of investment, without increasing customers’ bills. As Ofgem confirm a five-year investment programme. Ofgem Interim Director, Akshay Kaul, stated: “The investment outlined today provides value for consumers, ensures supply security, and helps ensure that the UK is no longer at the grace of international energy pricing and geopolitical events.

We have established the first investment that local energy distribution network operators can make between 2023 and 2028. With every pound reflecting value for money for consumers and no increase in rates.”

The economics of energy has evolved

“Together with additional nuclear and maybe hydrogen-powered electricity, these renewables will contribute to a lower-carbon energy mix more resilient to geopolitical events and energy price fluctuations.”

He continued, “These new low-carbon generation sources will need to be connected to an expanded power network to meet the increased demand for electricity. With millions more electric heat pumps in households and electric vehicles (EVs) planned in the coming years.”

“We have carefully assessed all the necessary work and set a budget for the networks accordingly. Driving the growth in a capacity required for net zero and delivering more dependable and resilient networks at no additional cost to consumers.”

This package determines the degree of investment that Ofgem permits local electricity distribution networks to make.

Work costs are recouped through network charges on consumer bills, reducing network earnings and enhancing efficiencies. Despite the increased expenditure, Ofgem has ensured that network bill charges would stay at £100 per year per bill payer. Ofgem’s final determinations are a continuation of its draft determinations, taking into account all stakeholder feedback in response to the consultation.

The final determination will be chased by a consultation on the requisite license amendments to execute the RIIO-ED2 settlement in December 2022. Followed by confirmation of the licenses and associated price control financial instruments in February 2023. The RIIO-ED2 pricing cap will begin on April 1, 2023. In the coming years, Ofgem anticipates significant changes to the energy sector, including:

  • Increased usage of renewables, such as wind and solar energy, is supported by expanding nuclear and possibly hydrogen-generated energy – all of which will require grid connections to deliver the energy they generate to where it is required.
  • Increased demand for energy due to the predicted rise in electric heat pumps for households and electric vehicles (EVs) on the roads, as the government mandates in 2020 that the sale of new gasoline and diesel vehicles would cease by 2030.
  • Increased use of innovative and digital technology offers flexibility and potential savings for consumers with greater control over their energy consumption planning due to constantly updated peak and off-peak rates corresponding to higher or lower generation times.
  • Users can sell energy back when energy levels are low from sources such as EV (Electric Vehicle) batteries.

Networks have been tasked with enhancing their resilience and reaction to harsh weather occurrences.

They will also be required to provide enhanced customer service and excellent protection for clients in vulnerable circumstances. Using flexible and adaptable regulation to encourage required investment and supporting new approaches to managing local systems. Which minimize unwarranted increases in network charges on bills, would help keep costs of the low carbon transition for consumers as low as feasible.

The RIIO-ED2 project will incur no additional expenses for users. With the average network costs for local electricity grids remaining approximately £100 per billpayer. This is accomplished by reducing network company earnings and boosting their operating costs’ efficiency. Requiring them to do more with less. Ofgem confirmed a five-year investment programme and it could be a massive step in the right direction.

  • Confirmed investment in six power distribution network businesses encompassing fourteen local networks. Networks were anticipated to deliver significant benefits by lowering investor returns and increasing their companies’ efficiencies.
  • The 2023 to 2028 price cap is centered on moving away from fossil fuel imports and our dependence on pricey gas.
  • Grid capacity will be increased, paving the way for cheaper, greener energy as many items rely on power.