Ofgem has published their proposed settlements (draft determinations) for the next network price control (RIIO-2) which will come into effect in 2021 and run for five years until 2026. The settlements will affect electricity and gas transmission and gas distribution companies.
David Smith, Chief Executive of Energy Networks Association, which represents the UK’s energy network companies said:
“While the proposals outlined today will take some time to review in detail, we are concerned that they don’t go far enough to encourage the investment needed to achieve net zero emissions and support the UK’s economic recovery. While network companies have historically been able to raise billions of pounds to invest in the networks and support the transition to a sustainable future at low cost to the customer, the proposals set out by Ofgem could significantly inhibit their ability to do so.
“Network companies listened to their customers and stakeholders and put forward plans informed and influenced by their extensive engagement through focus groups and events held around the country. The plans put forward by network companies would make this possible with little to no impact on the average energy bill.
“We need to attract significant investment in a competitive global market in order to reduce the UK’s carbon emissions, tackle the climate emergency and do so at least cost to customers. In the last few weeks, the Prime Minister and Chancellor have stated the need for much of this investment to be brought forward, delivering economic and societal benefits now as we recover from the pandemic.
“We will work with Ofgem over the coming months to highlight these concerns ahead of the final settlement being published in December.”
As lockdown measures ease, the energy networks are well placed to support the UK’s economic recovery. Employing 36,000 people and supporting vast supply chains across the country, the benefits of expenditure and investment by the networks is far-reaching.
National Grid predicts around 400,000 jobs in the energy sector will be needed between now and 2050 to deliver the net zero target. Of this, 260,000 will be in new roles, while 140,000 will be replacing those who have left the workforce.
The UK’s energy networks have already facilitated the connection of over 30GW of renewable generation in the past ten years and are undertaking projects which are set to create the world’s first zero-carbon gas grid and a move to a smarter energy grid.
Network companies must offer value to consumers, but also be attractive to investors where there is strong competition across Europe and more widely for investment to enable a green recovery.
By remaining attractive to investors, the network companies have proven themselves capable of mobilising billions of pounds of private capital. It is this capability and ongoing appeal to lenders which is essential to deliver the scale of infrastructure needed to support more electric vehicles on the roads, a shift to hydrogen gas and a significant increase in renewable generation required to hit our net zero climate targets.