A significant increase in investment in Great Britain's local electricity networks is crucial to meet the government's growth targets and lower long-term energy costs for consumers, according to the government's independent infrastructure advisor.
The National Infrastructure Commission's (NIC) new report, Electricity distribution networks: Creating capacity for the future, highlights that electricity demand is expected to double by 2050. To meet this demand and integrate renewable power sources, the report warns that the current pace of investment in the country's electricity distribution networks must also double.
The NIC's report argues that current regulatory frameworks set by Ofgem are too complex, hindering distribution network operators (DNOs) from proactively investing in the infrastructure needed to handle future demands and climate-related challenges.
“The regulatory system is not encouraging the proactive investments needed to ensure network capacity and resilience,” the report states. It calls for a more proactive approach to energy regulation and system planning to address these issues.
The Commission's analysis suggests that the necessary investment could add between £5 and £25 to the average annual household electricity bill by 2050. However, the report asserts that electricity bills will still be lower than today even with this additional cost, provided the government follows through on the advice in the NIC's second National Infrastructure Assessment to support low carbon energy and decarbonise heat.
Failing to address these issues, the report warns, would slow economic growth and hinder the government's goals for clean power delivery. To combat this, it recommends that Ofgem introduce new service standards for DNOs to ensure that commercial customers experience consistent service when connecting to the network. It also calls for stronger incentives for larger connections and higher performance expectations to drive improvements across the process.
John Armitt, Chair of the National Infrastructure Commission, emphasized the importance of taking proactive steps to modernize the local electricity networks. “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,” Armitt said. “That requires a new approach to regulation which encourages operators to make prudent local investments that anticipate future demand.
The NIC report stresses that the government needs to provide strategic guidance to Ofgem to simplify the price control process and ensure that future investments align with the goals of the new Regional Energy Strategic Plans.
Nick Winser, National Infrastructure Commissioner, also commented, “The days of our electricity coming from a few fossil fuel plants are over… Every part of our electricity sector must play its part in supporting economic growth, and distribution networks are no exception.
