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Ofgem proposes £25bn to transform Britain’s energy networks

Ofgem has unveiled a proposed five-year investment programme of around £25bn to transform Britain’s energy networks to deliver emissions-free green energy.

This money will be allocated to upfront expenditure to maintain and operate Britain’s gas distribution, and gas and electricity transmission networks as well as support the growth of green energy.


It’s also proposing providing additional funding to drive emissions-free energy and infrastructure upgrades that companies can access over the next five years as needed. This could see potentially another £10bn or more of net zero investment supported through the price controls.


Ofgem chief executive Jonathan Brearley said: “Now more than ever, we need to make sure that every pound on consumers’ bills goes further. Less of your money will go towards company shareholders, and more into improving the network to power the economy and to fight climate change.


“Ofgem’s stable and predictable regulatory regime will continue to attract the investment Britain needs to go further and faster on decarbonisation.”


On innovation, a new Strategic Innovation Fund - alongside funding to individual companies for network innovations - will provide £630m to drive research and development into green energy projects. This will include helping to expand the range of possibilities for decarbonising the heat infrastructure, with the potential to fund more if needed.


Ofgem’s proposals will also see nearly half network companies’ allowed rate of return. This means less of consumers’ money goes towards a network firm’s profits and more towards driving network improvements. It says this would save £3.3bn over the next five years for gas and transmission sectors alone.

 

Additionally, it’s proposing to cut more than £8bn from companies’ spending plans by setting stretching efficiency targets and disallowing costs that businesses have not justified as delivering value for money for consumers.


Ofgem says these proposals would lead to an expected £20 fall in network charges on bills per household a year. This would help offset the increase in investment and charges expected later in the price control.

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