REG - OFGEM NationalGridElecTran SP Transmission PLC - OFGEM FAST-TRACKS £4bn TO EXPAND ELECTRICITY GRID

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20/03/2025 08:15

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RNS Number : 3805B  OFGEM  20 March 2025

OFGEM FAST-TRACKS £4bn INVESTMENT TO EXPAND BRITAIN'S ELECTRICITY TRANMISSION
NETWORKS AND HIT THE 2030 CLEAN POWER TARGET

 

Britain's high-voltage transmission network will be expanded quicker, thanks
to Ofgem agreeing to accelerate £4bn of investment to build out the
electricity grid.

 

The regulator's new Advanced Procurement Mechanism (APM)
(https://www.ofgem.gov.uk/decision/electricity-transmission-advanced-procurement-mechanism)
will enable Britain's three transmission owners (TOs) to tackle supply chain
constraints in procuring essential equipment, materials and services years in
advance.

 

This streamlined process will ensure signed-off projects are ready to break
ground as soon as planning approval is granted, allowing TOs to avoid delays,
control costs and attract international investment in the drive to clean power
by 2030.

 

Britain's three TOs, National Grid ET, SSEN Transmission and SP Energy
Networks are responsible for owning and maintaining the national high voltage
electricity network.

 

Ofgem has agreed the £4bn of 'use it or lose it' capital allowances ahead of
and over the next price control period 2026 to 2031
(https://www.ofgem.gov.uk/decision/riio-3-sector-specific-methodology-decision-gas-distribution-gas-transmission-and-electricity-transmission-sectors)
- with the regulator able to reopen the settlement if market circumstances
changed. There are 80 transmission projects required to achieve clean power by
2030.

 

This first-of-its kind mechanism reflects Ofgem's commitment to the
government's statutory growth duty
(https://www.gov.uk/government/publications/growth-duty) . This compels
regulators to tear down barriers to promote growth and innovation - and the
concept could be extended in the future to support other areas of transmission
infrastructure.

 

Akshay Kaul, Ofgem Director-General, Infrastructure said:

 

"Building a modern, clean and secure energy system is the key to ending our
reliance on international gas markets responsible for volatile prices, so we
must do everything we can to clear the way for trailblazing projects to move
forward.

 

"The Advanced Procurement Mechanism is an innovative model that could be
extended in the future to develop other areas of the energy sector and
possibly mirrored by other regulatory bodies supporting the delivery of
national infrastructure.

 

"It's a significant step on the accelerator as we drive towards net zero and
we are committed to working with government, GB Energy and the National Wealth
Fund
(https://www.gov.uk/government/publications/a-new-approach-to-ensure-regulators-and-regulation-support-growth/new-approach-to-ensure-regulators-and-regulation-support-growth-html)
to maximize the economic opportunities of infrastructure investment.

 

"Across the world many countries are stepping up their investment in clean
energy at the same time, putting unprecedented pressure on the supply chain as
growing demand for essential materials forces up prices and lengthens delivery
times.

 

"This is why it's vital that we help the electricity transmission owners move
quickly, procuring at scale as early as possible to reduce financial risk -
and show the global supply chain that Britain is committed to investing in its
energy networks."

 

Energy Minister Michael Shanks said:

 

"This fast-track measure means we can quickly get Britain building the
infrastructure we need to deliver clean power by 2030 and an energy system
that can bring down bills for households and businesses for good.

 

"Giving developers a head start in the global race to secure essential
materials and equipment will help to avoid delays by putting shovels in the
ground as soon as clean power projects secure planning permission, and protect
billpayers by keeping costs down.

 

"This builds on our work to reform our broken planning system to speed up
renewable energy projects like wind farms, and to overhaul the grid
connections queue to connect clean power projects quicker."

 

The APM balances acceleration with accountability to ensure that companies
operating within Ofgem's strict financial framework are delivering projects on
time and at the best value to customers.

 

Its advantages include:

 

·      reduced risk of costly supply chain delays as global demand for
vital infrastructure materials increases

·      lowering or controlling build costs by purchasing materials in
advance, as supply and demand steadily raises prices year on year

·      driving inward investment in domestic supply chains, as pledged
in the government's 2030 Action Plan
(https://www.gov.uk/government/publications/clean-power-2030-action-plan)

·      accelerated project delivery which will help government achieve
clean power by 2030, and subsequent net zero targets after that

 

APM chimes with independent advice
(https://www.neso.energy/publications/clean-power-2030) provided to government
last November by NESO which called for a step change across the energy sector
to achieve clean power by 2030.

 

To protect consumers the regulator is clear in its governance rules to ensure
that the APM is used only for the intended purposes and any unused funding
will be returned to consumers.

To minimise the risk of stranded procurement (pre-ordered equipment for
projects that do not progress), Ofgem will ensure that only equipment that is
transferable between many different projects is eligible for APM funding. More
bespoke procurement will be considered on a case-by-case basis to assess the
benefit and risk.

 

BACKGROUND

The final decision on the Advanced Procurement Mechanism (APM) is published
here
(https://www.ofgem.gov.uk/consultation/statutory-consultation-modify-special-licence-conditions-electricity-transmission-licences-advanced-procurement-mechanism)
with response to the APM consultation is here
(https://www.ofgem.gov.uk/node/178040/latest) . Ofgem is also publishing a
statutory consultation
(https://www.ofgem.gov.uk/consultation/statutory-consultation-modify-special-licence-conditions-electricity-transmission-licences-advanced-procurement-mechanism)
to modify the special licence conditions to implement the APM decision.

The APM decision is ahead of final decisions on investment and price controls
settlement for the three TOs from 1st April 2026 to 31st March 2031. The final
decision on the RIIO-3 framework is due by the end of 2026
(https://www.ofgem.gov.uk/decision/riio-3-sector-specific-methodology-decision-gas-distribution-gas-transmission-and-electricity-transmission-sectors)

Ofgem is consulting on the final model to accelerate renewable power farms and
electricity storage connecting to transmission network. The provisional
decision was published
(https://www.ofgem.gov.uk/press-release/clean-power-2030-one-step-closer-proposed-new-fast-track-grid-connections-system-unveiled)
in February 2025 and the final decision is due in April 2025.

Ofgem is also considering further reforms to speed up network companies
connecting new and power in its 'end to end' review of the system
(https://www.ofgem.gov.uk/press-release/fast-tracked-grid-connections-could-be-place-months-under-new-proposals)
 

For more information contact press@ofgem.gov.uk

 

 

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