GB electricity distribution networks investment needs to double – report
Image: Iberdrola
With electricity demand in Britain set to double by 2050, the current pace of additional investment in the electricity distribution networks must also double.
This is according to the country’s National Infrastructure Commission, a government advisory body, in a new study on the electricity networks.
This “step change” in investment, as the study puts it – £37-50 billion ($47-63 billion) between today and 2050 – is necessary to ensure the system can cope with rising demand and connect both new sources of renewable power and new electricity demands to the grid faster and thereby achieve the government’s growth mission and lower long term energy costs for consumers.
While the Commission estimates that delivering the level of investment required could add between £5 and £25 to the average annual household electricity bill by 2050, it believes electricity bills can still be expected to be lower than today even after this additional cost, provided all the recommendations are implemented.
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Sir John Armitt, Chair of the National Infrastructure Commission, commenting on the findings said the UK is heading in the right direction on decarbonising power, but can’t be complacent.
“We must learn the lessons from playing catch-up on transmission grid expansion and get ahead of the curve on investing in our local networks, so people can enjoy the benefits of electric vehicles and heat pumps safe in the knowledge the network will back them up, and businesses can connect where and when they need to.”
The year-long to complete report comments that while there is uncertainty around exactly where and when new sources of demand will connect to the network, waiting for that demand to materialise risks investing too late, creating bottlenecks and delays.
The report also points to consumer-led flexibility being an important part of the future energy system and that maximising this could reduce the amount of investment required in the distribution network by around 15%, while additional savings could be made from avoiding the need to build generation and transmission network capacity beyond that required.
Planning and regulation
Another key finding in the report is that significant changes in how networks are planned and regulated will be needed to deliver the required level of proactive investment efficiently and effectively.
This includes strategic planning of energy supply and demand to provide more certainty on the needs case for investment – an issue expected to be addressed with Ofgem’s proposed regional energy planning approach with the first of these anticipated in late 2027.
Price controls also will need to be reformed. The current regulatory process is too complex and focused on the short term cost of network investment and the price control should be rebalanced around a broader set of long term objectives, including enabling economic growth, accelerating progress towards net zero, strengthening network resilience and delivering high quality customer service.
To deliver the increasing number of new and modified distribution connections required, improvements to the connections process and customer experience also will be needed, with new service standards for network operators recommended.
The other key finding is that supply chains and workforce capacity need to be more actively managed to speed up project delivery.
There are increasing pressures from inflation, stronger global competition and longer lead times, as well as competition for skills across the energy sector and wider economy.
While strategic planning and price control reform can help manage these challenges by offering greater certainty around the need for forthcoming network investment, proactive interventions to meet current and future skills gaps are urgently needed.
This must include measures to attract, recruit and retain the large workforce needed to deliver the energy transition, states the report.
The report has been widely welcomed in the sector, in particular the needs for increased investment in the networks and a focus on the long term needs.
Lawrence Slade, Chief Executive of the Energy Networks Association, added: “More widely, we support the report’s findings around the need for wider changes beyond price controls, including reforms to speed-up the planning and consenting process for network infrastructure, the need for a holistic approach to industry skills development and proactive strategies for addressing supply chain issues.”
