The energy regulator has confirmed plans for a massive upgrade to the UK’s energy grids, adding £108 to customer bills by 2031.
Ofgem said on Thursday that the £28bn investment over the next five years would bolster resilience in the transition to a renewable energy future and that much of the bill would be offset by increased efficiency.
It pointed to estimated savings for households of around £80 because of the planned investment in gas and power infrastructure, leaving a net additional contribution of £28.
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Ofgem said the £28bn sum formed part of an estimated £90bn to be invested in the energy networks by 2031, with “adaptive” funding arrangements helping to shield customers from volatility in the market.
Most of the funding announced today will go towards maintaining gas networks, which will remain a key source of energy as green power capacity is built up further.
“Investing now to maintain world class resilience and expand grid capacity is the most cost-effective way to harness clean power, support economic growth and protect the country from gas price shocks like the one seen in 2022”, Ofgem said.
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Then, Russia’s invasion of Ukraine and Europe’s refusal to buy Russian gas in response, meant that energy bills hit unprecedented levels and gave birth to the wider cost of living crisis as higher energy costs were passed on across the economy.
Ofgem made its announcement as costs of government energy policy and other upgrades make the biggest upwards contributions to household bills though the budget moved to take away some costs from April next year.
Ofgem boss Jonathan Brearley said: “The funding announced today will keep Britain’s energy network among the safest, most secure and resilient in the world. The investment will support the transition to new forms of energy and support new industrial customers to help drive economic growth and insulate us from volatile gas prices.
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“But this is not investment at any price. Every pound must deliver value for consumers. Ofgem will hold network companies accountable for delivering on time and on budget, and we make no apologies for the efficiency challenge we’re setting as the industry scales up investment.
“We’ve built strong consumer protections into these contracts, meaning funds will only be released when needed and clawed back if not used. Households and businesses must get value for money, and we will ensure they do.”
A Department for Energy Security and Net Zero spokesperson said: “This government is taking action to bring down energy bills for families, with the Budget taking an average £150 of costs off bills in April, and expanding our £150 Warm Home Discount to over six million families.
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“Upgrading our gas and electricity networks after years of underinvestment is essential to keep the lights on and ensure energy security for our country. Without these plans, which were first set out under the previous government, costs would spiral and our security would be compromised.
“The only way to bring down bills for good and get off the fossil fuel rollercoaster is with this government’s mission to deliver clean homegrown that we control.”
