The UK power network operator will have a £20.9bn budget to expand the grid to connect millions of electric vehicles, smart systems and small renewable energy projects over the next five years.
The budget will be used for service, maintenance, upgrades and repairs by six UK distribution network companies from April 2023, and has been approved by regulator Ofgem. The plan, which includes tree-cutting, flood protection and other energy security measures, aims to improve the resilience of the UK's 497,100 miles (800,000 km) of overhead and underground transmission lines in the face of more severe weather events in the future.
Improving the distribution network, the local network that supplies electricity directly to homes and businesses, is critical to the energy transition. These investments impact consumers' bills, and Ofgem's job is to make sure the costs are reasonable. RBC Europe Ltd. said that for every euro invested in renewable power generation capacity, 0.70 euros needs to be invested in the network.
Grid operators have long argued that investors need reasonable returns to make the clean energy transition possible. But it's a balancing act for Ofgem, which must avoid burdening consumers with financing costs for projects that could prove obsolete as technology advances.
The budget includes £2.7bn for building the new network. Currently, grid costs add around £100 to household energy bills. Ofgem will publish a final decision on its draft proposal by the end of the year.
